4 Misconceptions About Foreclosure That Will Cost You BIG!
We’re going to briefly address 4 misconceptions about foreclosure that can cost you thousands.
Misconception #1 Bankruptcy Will Stop Or Avoid Foreclosure. This is a big one. Bankruptcy, whether chapter 7 or 13, will NOT prevent a foreclosure. What it will do is delay it for a time. As soon as a homeowner files BK, the lender(s) are held at bay by an "automatic stay”. The lender immediately requests a relief from stay, and as soon as it is granted they will complete the foreclosure.
Misconception #2 Foreclosure Is No Worse Than Bankruptcy On Credit. Foreclosure is worse than BK on credit. It is the worst possible indicator of risk to a potential future creditor. In some cases, after filing BK, you can be re-established in 12 months. However, foreclosure will give you a very hard time for years. This also trickles down into other areas of your life, such as rate adjustments on auto insurance, credit cards, even employment review can be affected.
Misconception #3 Deed-in-lieu Of Foreclosure Is a Godsend. Not really. It is only slightly better on a credit report than foreclosure. There are some potential nasty surprises with a deed-in-lieu that most people don’t know about if the document isn’t prepared properly in the homeowner’s favor. This should be a plan Y (plan Z being foreclosure) and handled correctly.
Misconception #4 After The Foreclosure, It’s All Done. Wrong! In some states, the lender has the right to pursue deficiency judgment against the borrower if the sale of the property doesn’t recoup the lenders investment. This may include junior lienholders as well. There are also possible tax implications that are complex and beyond the scope of this article
The bottom line is to completely avoid foreclosure. This may mean keeping your house with proper arrangements being made with the lender if your financial situation has changed for the better. However, if your financial situation has not changed you may need to sell to avoid foreclosure. This may enable you to better protect your future. Either way, seek competent help.
Greg Picone is the President of Ideal Homes, LLC, a company that specializes in helping folks out of foreclosure even with little or no equity. You can visit their website at http://www.solvedquick.com
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