Newbie - Bankruptcy vs. Forclosure

[aherrmie]

Hi all -

I'm glad to have found this forum, and am looking forward to getting to know you all.

My husband and I are in serious financial difficulty, which should come as no surprise. I've been unable to work for several months due to medical issues. We fell behind on our mortgage, and were unable to catch up. We tried to get our house on the market to sell, but ran out of time. The forclosure sale date is 01/12/2007. We know we can't afford to keep the house on one income, even if we file a Chapter 13. This is really the only debt we are behind on. We've moved in with my husband's parents, but have kept the homeowner's insurance, etc up to date.

My question is, what is worse for future credit, a forclosure or bankruptcy filing?

We're trying to do the right thing, but it's so confusing and stressful.

Thanks,

Amy

[HHM]

If you weren't cutting it so close (you only have a couple weeks until the sale date), I would have recommended a Foreclosure Workout Agreement. However, there is probably not a enough time to do that. You may want to consult with an attorney who handles foreclosure defense (they are harder to find than bankruptcy attorney's, but some exist, just to see what options you might have. Bankruptcy attorney's will naturally steer you toward BK, and don't really offer other options).

As for the credit report, both foreclosure and bankruptcy are equally bad. And, since the bank has already started the foreclosure process, it is ALREADY, and will continue to be on your credit report regardless of what you do now. So I suppose, unless you want to keep the house, you might as well let it go and do nothing. However, there are some caveats, is there any equity (probably not if you haven't been able to sell it), but if there is, you may want to file BK to protect that equity for the future. Also, you need to find out if your state allows a deficiency balance to be collected if the house fetches less than what is owed at auction (most states do not allow it, but some do).