During financial hardships on a home mortgage, some homeowners find it difficult to understand the differences between Foreclosure and Bankruptcy, and which options to consider.
Foreclosure is a legal process in which a lender attempts to recover the balance of a borrower’s unpaid home loan. Consequently, the lender forces the sale of the asset or the house to cover the unpaid mortgage of the borrower.
Bankruptcy is the legal process through which consumers and businesses experiencing financial hardship can receive debt relief. The process involves either selling assets to repay the debt or creating an alternative repayment plan. Bankruptcy is often considered a last-resort option.
Similarities of Foreclosure and Bankruptcy:
Both foreclosure and bankruptcy will be reported on your future loan applications.
Both foreclosure and bankruptcy can affect your credit history.
Differences between Foreclosure and Bankruptcy:
The foreclosure process can be initiated by the lender, while the bankruptcy application can be applied by an individual. In other words, bankruptcy is a voluntary filing of the borrower while the foreclosure is not.
Bankruptcy allows an individual to obtain a discharge of or payment plan for their debts while foreclosure allows a mortgage lender the ability to claim ownership of real estate to assist in satisfying the balance owed on a past due loan.
In foreclosure, the real estate property is controlled by the lender, while on the other hand, the same is being controlled by the individual in bankruptcy.
The impact of foreclosure on someone’s credit report remains for 7 years, while the same remains for 10 years in bankruptcy. The impact varies in bankruptcy as it could improve a low credit score due to the elimination of debts.
There is a 5-year restriction on buying a future home in foreclosure. On the other hand, there are no restrictions at all in bankruptcy.
There is really no “best” option between foreclosure or bankruptcy, as you have to reconcile the issue of missed mortgage or loan payments. Ideally, it would be best to avoid either situation. There are options available for you to avoid foreclosure or bankruptcy – contact CPD Homes LLC!
CPD Homes is ready to buy any type of traditional or distressed property. We will give a quick and secure property deal. We help with troublesome tenants, undesirable inherited properties, behind on home loans, worn out houses, approaching abandonment or foreclosures, divorce, work misfortune and more. Our process is quicker than traditional ways as you don’t need to worry about cleaning or repairing issues in the home- that’s our job! CPD Homes will buy your house in any condition.
If you are facing difficulties, do not hesitate to call us. We are happy to answer any questions you have and explore options to help you out of your current distress. To know more about the basic differences between foreclosure and bankruptcy, or just about any other related information, you may call us @ 216-282-4332, visit www.cpdhomes.com, we’ll be more than happy to assist!