Is it better to foreclose first, or go into bankruptcy?

Question

My mother is falling behind on her mortgage payments and in the middle of divorce. Eventually she will have to foreclose, but should she wait until the divorce is done with? Whats the best course of action. Anybody? She lives in California.

Answer 1

Bankruptcy is almost never the best way out of a difficult financial situation.  She may not have to lose her home.

Many lenders are now willing to work with a homeowner, in order to help them avoid foreclosure.  Since your mother's financial situation is taking a hit due to divorce, they may allow her to renegotiate her mortgage.  She may be able to accomplish one or more of the following:

** Reduce the principle amount owed

** Reduce her interest payments

** Lenthen her mortgage

** Recapitalize any late payments

** Reduce her monthly payment

She should contact her lender to see if the lender would be willing to offer any assistance.  If she cannot make any headway dealing with them directly, she should seek out a reputable, experienced mortgage negotiation firm.  

Let me know if you need a referral.  She should see what her divorce terms may be.  Perhaps, she will be able to receive enough support to put her in a position to maintain the payments.  

Good luck, and avoid bankruptcy unless you get into a hopeless position.  If your mother's sole source of income is retirement benefits, and not earned income, then bankruptcy would be a waste of time, as her benefits cannot be attached.

Answer 2

bankruptcy is better because you are bankrupt in black and  white then you have legal protection from anyone else  

Answer 3

She will need to speak to a bankruptcy attorney in your area to see what she qualifies for. She can keep the house in either a chapter 7 or chapter 13 and a bk attorney can advise her on which on is best for her situation. Bankruptcy should be her last resort. You don't give much information, but, if they foreclose, she still owes the balance after foreclosure, and a sell of the home, then the bankruptcy would protect from collecting on the debt. The debts are on her credit report 7 years, while the bankruptcy filing on her credit report for 10 years. She can sell the home, and try to keep from having it foreclosed on, or bankruptcy. Best advice is to contact an attorney and get legal counsel, most will see her on a free first consultation. Good Luck!

Answer 4

Ummm no. Bankruptcy is not better. What is better is this.... If she realizes that she is going to end up foreclosing anyway because she doesn't have the money to make it work then she should do this:

Sell the house quickly to a wholesaler, If you need 1 let me know. Sell it for what you owe, plus a few thousand, so she doesn't walk away empty handed. The bank will be satisfied for what you owe, it will end up being a positive thing on her credit. Instead of a negative. Wholesalers pay cash, and they close fast. They'll reinvest into the property and resell. They make a profit, your mom makes a small profit and isn't emptihanded. This is what you do! Don't wait til the last minute for her to be broke , homeless and have negative stuff on her credit. Do it now!