Short Sale Vs. Bankruptcy Vs. Foreclosure
If you are faced with the overwhelming dilemma of deciding whether to file for bankruptcy, foreclose on your home or apply for a short sale, a short sale is one you want to fully consider before a lender files to foreclose on your home.
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Prevention
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One way to prevent foreclosing on your home and filing for bankruptcy is to contact your lender and obtain approval to do a short sale, meaning selling your home for less than what it is worth.
Types
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There are two types of common personal bankruptcies that individuals file. Chapter 7 bankruptcy erases all your unsecured debts like your credit cards and other financial obligations for good. Chapter 13 bankruptcy does not erase all your debt, but it allows you to pay down on your debt up to five years.
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Misconceptions
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Filing for bankruptcy does not put a permanent stop to the foreclosure process. It may delay the foreclosure process for a few months, but the inevitable of foreclosing will happen if you do not have the means the make your monthly mortgage payments.
Options
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According to Liz Weston from MSN Money, filing for Chapter 13 bankruptcies can buy you time by allowing you to save your money to stop the foreclosure process on your home and start making the monthly mortgage payments if you are able.
Considerations
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There may be tax implications in obtaining a short sale, filing for bankruptcy and foreclosing on your home. Therefore, it is important to consult with tax accountant. Additionally, your credit score will be affected negatively by a short sale, a bankruptcy or a foreclosure.
Warning
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Obtaining future loans with a bankruptcy and foreclosure in your financial record are a sign to lenders you are a risky customer. For example, you are not eligible to receive a mortgage loan with a lender like Fannie up to five years, if you file for bankruptcy and foreclose on your home. For a short sale, you have up to two years.
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