When your home is in the foreclosure process, you might be tempted to panic. You may feel like you don’t have any options. Many have been in this same situation, and there are options out there. The trick is deciphering between the options and pinpointing the one that will be best suited to your situation: bankruptcy and foreclosure, short sale or deed in lieu of foreclosure.
The Short Sale
Definition: Selling a property for less than the balance that is owed.
Summary: Out of the three options being discussed, the short sale is the one that will allow you to buy again with the shortest wait time. It is the least damaging to your credit. Short sales can be more difficult if you have home equity lines of credit attached to your property. Negotiations must include all the lenders and the second lender will often require money in order to agree to the short sale.
Estimated time required before you could purchase another home: Approximately 2 years.
Deed in Lieu of Foreclosure
Definition: A transfer of property back to the lender before a property is foreclosed.
Summary: This process allows you to avoid the foreclosure. It has benefits similar to a short sale, but the homeowner’s credit report could reflect that the property was transferred back to the lender. The process is very difficult to complete because most lenders would prefer to complete the foreclosure process because the Deed in Lieu of Foreclosure can be seen as burdensome and means an increase in the potential for errors for the lender.
Definition: Filing a petition for debt discharge through the bankruptcy court.
Summary: Bankruptcy completely absolves the filer of liability for their mortgage. The bankruptcy process slows down the foreclosure process, which can delay your ability to buy a new home. Bankruptcy is also the most damaging of the available options because you will end up with both the bankruptcy and the foreclosure on your credit report.
Estimated time required before you could purchase another home: Approximately 2-3 years.
Regardless of which route you decide to go, finding yourself in this situation is hard. We’re sorry to hear that you will not be able to keep your home. But hopefully you will be able to recover quickly and purchase a new home in the next few years. If you’d like more information on filing for Chapter 7 or saving your home through bankruptcy, call the southern California bankruptcy experts at Westgate Law.