Which Is Worse Bankruptcy Or Foreclosure ?
Today, many people in the United States are faced with foreclosure, and there are still others who are close to being bankrupt due to the current recession. At the same time, there might be some people who are facing both, foreclosure and bankruptcy. When going through a foreclosure or bankruptcy, people often wonder which is worse. |
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This is a very difficult question to answer. Both bankruptcy and foreclosure have a negative impact on a person's credit rating. However, certain situations may make one worse than the other. It all depends on the type of credit you would need in future.
There are two kinds of bankruptcy that are common. Chapter 7 bankruptcy is for individuals whose debt is released without arranging a pay back plan. On the other hand, a Chapter 13 bankruptcy includes a pay back plan which is determined by a judge.
In both Chapter 7 and Chapter 13, the judge can order the person to sell all their personal assets to clear the debt. A trustee is appointed by the court to carry out the liquidizing of the assets.
In a foreclosure, the property is repossessed by the lender because he is not receiving the payments from the borrower for the mortgage. In a bank foreclosure, the property is typically sold at an auction. The borrower is responsible for all the court fees for the foreclosure and auction process.
Both foreclosure and bankruptcy have dark effects on a person’s credit standing as well as his life. However, a foreclosure is far worse than bankruptcy if you have to apply for fresh mortgage loans. Banks are very unforgiving when they see a foreclosure on your credit report. Bankruptcy is viewed as a lesser risk.
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