Across the country, countless families are feeling the strain of being weighed down by a heavy debt load. While Americans have always struggled with debt, the recent COVID-19 pandemic has served to put individuals even farther behind, leaving homeowners facing the possibility of foreclosure. Almost half of all Americans have reported the loss of income from March through July, according to Census data.
If you are one of the many people afraid that you may lose your home, you are probably wondering if it’s best to file for bankruptcy now or wait until after your house is foreclosed upon. While filing for bankruptcy may seem scary, choosing to do so before you lose your home can have significant benefits and set you on the path toward better financial footing sooner than you think.
A Foreclosure Doesn’t Always Cancel Your Debt
When your home is foreclosed upon, it is often sold at an auction or at a significantly reduced rate. This is done so that the lender can collect money as quickly as possible. Unfortunately, this often leaves a deficiency or amount of the mortgage that is still unpaid. In some cases, the lender can still request that the rest of the deficiency be paid and, in the event that they choose to forgive you the remaining balance, the credit can be counted as income on your taxes. It can seem like a lose-lose situation; however, there is hope!
Bankruptcy Is The Best Answer
By choosing to pursue a bankruptcy before you reach foreclosure, you can eliminate any possibility of a deficiency while also doing away with the threat of higher taxes. While these answers might be helpful, the news gets even better!
When you begin the bankruptcy process, your foreclosure is forced to stall, helping you to stay in your home for several months—during this time, you can choose to work harder to catch up on delinquent mortgage payments so that you can keep your house. In addition, some bankruptcy proceedings will do away with mortgage debt and make it possible for you to refinance payments to start over fresh.
Take Action Now!
In the wake of COVID-19, it would be nice to think that debtors will be more understanding of those who have fallen behind on their payments. Sadly, this is not proving to be the case. With foreclosure bans lifting, some banks and mortgagers are ready to foreclose on those who have missed even a handful of payments. To ensure that you stay in your house and avoid foreclosure, your best course of option is likely to file for bankruptcy before a foreclosure is underway. Don’t wait until you are at risk of being kicked out on the street – take action now!
Over the years, bankruptcy has gained a bad reputation. Too often, people think of bankruptcy as a last resort with serious consequences. While bankruptcy shouldn’t be one’s first option, it is a good way to resolve existing debts, keep one’s home, and build a better, more financially-free future. The corona pandemic affected everyone – by pursuing a bankruptcy you can ensure that you put the aftermath in the past and follow after a better tomorrow.