Should I Let the Bank Foreclose on My Home or not?

by GuestPoster on December 12, 2010

It is a question many debtors are wondering should I let the bank foreclose on my home? Well, the answer to this question depends on several factors. You have to think about whether you can continue to afford the mortgage, the consequences of foreclosure and where you would live after losing your home.

If you can find a way to afford your mortgage, keeping your house would be best. To do this, you can try getting refinancing or filing Chapter 13 bankruptcy. With the latter option, you would be put on a payment plan to deal with previous debt. Future payments would be negotiated with the lender. Note that this differs from reaffirming your mortgage, (an option available with Chapter 7 bankruptcy). When this is done, your previous debt gets discharged, but you are still responsible for ongoing payments. This is assuming that your bank even accepts such an agreement, as many will not. If this is a problem, stick with Chapter 13 bankruptcy.

For those that prefer not to use these measures, there is the next concern dealing with the consequences of foreclosure. Beyond blotching your credit, foreclosures can carry more serious problems. It does not matter who the initiating bank is. Whether you are dealing with a BOA or a Regions Bank foreclosure, the result is the same. If they cannot cover your entire debt during their foreclosure sale, you may be hit with a deficiency judgment. This is a legal instrument that turns the debt into taxable income. As a result, you will have to file it with Uncle Sam.

Finally, you need to think about where you will live after your foreclosure. With refinancing or a Chapter 13 bankruptcy, you can stay in your existing house. During a foreclosure, you have a month or two before you are finally evicted. Once this happens, you may have difficulty finding another place, as most landlords want tenants with good credit.

In conclusion, try not to let the bank foreclose on your home. Consider other avenues before completely giving up. Should these ventures fail, you might be able to buy yourself more time by protesting the foreclosure. Although this is a long shot, some people have actually won back their houses, especially if there was concern over fraud. Of course, if this does not happen in your situation, at least you will be given a few more months to decide what to do.

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