As a result of the housing bubble and the poor economy, home foreclosures in Kentucky and Indiana, as well as elsewhere across the country, have become an epidemic. Suffering a foreclosure can have a devastating impact, not only from the obvious hardship of losing one’s home, but from the extremely negative impact it can have on one’s credit.
Like most negative information, such as repossessions and judgments, foreclosures stay on one’s credit report for 7 years. From a credit standpoint, however, a foreclosure is one of the hardest things from which to recover. For someone trying to finance the purchase of another home, a foreclosure is the worst piece of information that can appear on the credit report. In order for someone to qualify for a conventional home mortgage loan who has had a foreclosure on his record, the foreclosure must be more than 7 years old. What makes matters worse is that the 7 years runs from the date the foreclosure sale is complete, that is the date the new purchaser takes title to the property. Because the foreclosure process can drag out for months if not years before a new owner takes title, it can often take much longer than 7 years from the start of a foreclosure before one can obtain a loan.
Filing a Chapter 7 Bankruptcy, on the other hand, actually speeds up the time frame for obtaining new credit. Although the bankruptcy filing itself will stay on one’s credit report for up to 7 years, the rules for obtaining a mortgage loan are much more lenient for someone filing Chapter 7 Bankruptcy than they re for someone with a foreclosure on his record. For example, a conventional mortgage loan can be obtained 4 years after a bankruptcy discharge and an FHA or VA loan can be obtained 2 years after the discharge.
Whether or not you are trying to save your home, Bankruptcy may be a better alternative than letting it go into foreclosure.
Consult with a Louisville or Southern Indiana bankruptcy attorney before it is too late to save your credit.