What is worse bankruptcy
or foreclosure?
So what is worse, bankruptcy or foreclosure? Which will
have the biggest impact on my credit score? Both bankruptcy
and foreclosure will have serious negative affects on
your personal credit report and your credit score as
well. With re-established credit after a bankruptcy
and/or foreclosure you can possibly qualify for a good
mortgage once again in as little as 24 months. Therefore,
it is very difficult to say one is worse than the other,
but the bottom line is that they are both very bad for
you and should be avoided if all possible.
Bankruptcy and Foreclosure filings are public records,
however no one would know about your proceedings under
normal circumstances. The Credit Bureaus will record
your bankruptcy and a foreclosure. Bankruptcies will
remain on your credit record for 10 years while foreclosures
can stay on your report for up to 7 years.
Foreclosure is worse because of the loss of value.
You will not receive any compensation for the equity
in your home if it proceeds to foreclosure.
Foreclosure is worse then bankruptcy because you
are actually losing something of value, your home. Once
you are in foreclosure you will lose any and all equity
in your home. If there is no equity in the home you
will be responsible for the remaining balance after
the property auction. With chapter 7 bankruptcy all
of your unsecured debts are erased and you start over
and in most cases you will not lose anything other then
your credit rating.
In some cases, one can refinance out of a Chapter
13 Bankruptcy with a 12 month trustee payment history
and a timely mortgage history. It is much more difficult
to obtain financing with a foreclosure on your record.
Many times qualifying for a mortgage after a foreclosure
is more difficult than applying for a home after a bankruptcy.
With that said, that could possibly lead you to believe
that foreclosure is worse than bankruptcy. Most people
who have a home foreclosed upon end up filing bankruptcy
as well.
