Filing Bankruptcy Or Accept Foreclosure
Homeowners facing foreclosure often consider bankruptcy, but is bankruptcy a better option than foreclosure?
Let's take a look at a few of the factors debtors should consider:
Desire And Ability To Keep Home
The first question a debtor should ask before filing bankruptcy to avoid foreclosure, is if they want to keep their home. If so, does the debtor have the cash and/or income to keep the home in bankruptcy? Whether they file Chapter 7 bankruptcy or Chapter 13 bankruptcy , the debtor is required to make monthly mortgage payments if they are to have any chance of saving their home. The ability to do this depends solely on the debtor's financial means.
Value Of The Home
While some bankruptcy debtors may want to keep their home and avoid foreclosure, doing so may not be in their best interests. If the home has very little value, the mortgage is upside down or the home is in disrepair, saving it in bankruptcy may not be worth the trouble.
If a debtor has other, non-mortgage related debts, they may want to file bankruptcy regardless of their desire to keep their home. Other debts should be considered for another reason, if the debtor wants to keep another asset such as a car and that car has a loan attached to it, those monthly payments may make it more difficult to pay the mortgage. In the end, the debtor may need to choose which asset is more important to them. There is no standard answer to that question. A car could be just as important as a home if you live 40 miles from work and have no other means of transportation.