It can be a confusing time for families facing foreclosure. It's not uncommon for homeowners to seek advice from people that are unqualified to handle their specific situation. For example, people may ask close friends or family for solutions to foreclosure thinking bankruptcy is their only solution. Instead, they can work with a team of investors with a lot of experience with the ability to guide them through the process comfortably. Let's have a look at why bankruptcy is not the best option if someone is facing foreclosure.
People facing foreclosure have many options available to them, but a lot of these options don't make a lot of sense unless they're facing extraordinary circumstances. For the most part, escaping foreclosure doesn't have to be as complicated as people make it out to be. There are complicated ways to navigate through that can be very expensive and even unnecessary. Also, there are also more straightforward methods designed to help homeowners move on with their lives quickly. The bottom line is there are better options available then only bankruptcy.
Even attorneys may offer advice not in the best interest of the homeowner because they haven't handled enough volume to understand the various outcomes or they need to bill more per case because they only see a limited number a year. Many foreclosure attorneys use bankruptcy as their go-to approach to stop a foreclosure when It may not make sense for most situations. Remember a short sale is for free in bankruptcy costs a lot of money. Filing for bankruptcy will unquestionably stop the foreclosure in its tracks but also remember the attorney needs to be proactive and file it promptly. The attorney fees can add up very quickly and so can the interest and penalty fees the bank will attach to your case.
There are two types of bankruptcy homeowners may hear about from an attorney. The first one is chapter seven and the second one is chapter thirteen. Each has their strength. Chapter 7 is mainly used to help homeowners get out of their home and out from under their debt. Chapter 13 is designed to help families planning to keep their home. If a family owes more then what a house is worth, then it makes no sense to attempt to keep the home. If however, a family has equity there are better options then to file for bankruptcy.
If a homeowner is filing for bankruptcy through an attorney only to stop a foreclosure and the only debt they have is their home. It doesn't make a lot of sense because that attorney is going to cost the homeowner around $5,000 to file the claim. These additional fees can be very difficult for homeowners when they are already in a lousy situation unable to make their current payments. Not to mention, what bankruptcy will do to their credit score for many years down the road. It can impact a family attempting to get another mortgage, credit cards or even an automobile in the future.
Most homeowners do not carry enough debt to justify claiming bankruptcy when there are viable alternatives to remove them from the current situation without all the long-term downsides. Also, bankruptcy will not eliminate student loans or alimony because there are some restrictions. Also, bankruptcy does have its limitations because certain things don't qualify such as student loans or alimony.
To conclude bankruptcy attorneys can be expensive and may not have the homeowners best interests in mind. If a family does not have equity in the home and are facing foreclosure bankruptcy is especially not a good option. If the homeowner can work with a team of investors working with these situations on a daily basis, it may reduce their costs and allow them to get out of foreclosure without the long-term complications.