With the recent downturn of the economy, numerous American homeowners are scrambling around to prevent their home from going on the foreclosure market. Individuals who are unable to pay their mortgage debt are often left with two possible options – bankruptcy or loan modification. The question becomes which one to opt for that will offer the best possible results.
Bankruptcies offer an automatic stay that prevents creditors from coming after the debtor to collect money, including past mortgage payments. While this can stop foreclosure proceedings for a few months, it is not always guaranteed. There are ways that lenders can get around the automatic stay and foreclose a home. Before filing for bankruptcy, it is advantageous to first look into loan modification. But why is this?
· Once an individual files for bankruptcy, there is nothing left to be done. Bankruptcy only offers protection in the short term with no guarantees that foreclosure will not proceed. Loan modifications, on the other hand, will make mortgage payments easier to manage and will save the home.
· Bankruptcy puts a big black mark on a person’s credit report for up to ten years. It can dash hopes of getting a loan for a long time. If someone does get a loan, because they are at risk, they will have to deal with high interest rates. Loan modifications allow individuals to pay regular installments while saving money to put toward other debt.
· Loan modifications that are successful can actually aid in improving one’s credit report. If homeowners maintain timely payments, credit scores do improve.