Jenny S

Is it a better idea to file for bankruptcy or to let your house go into foreclosure?

I have a mortgage with a HELOC. Due to a cut in hours and erratic child support payments, I am unable to afford to cover my bills. I am considering letting my house go into foreclosure. Which is better?

...asked on August 16th, 2011 @ 12:00 pm in Foreclosure

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bankruptcy is better.

...answered by appygirl on August 16, 2011 @ 12:06 pm

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If you cant afford it sell it. Its rough to sell but always remember you can talk to your mortgage company on a short sell. Someone buys it for less then you own but the bank will take that payment as paid in full.

...answered by jsnlong1979 on August 16, 2011 @ 12:17 pm

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Sell the house! If you go into foreclosure you will still owe the difference between what the lender sells it for and the amount of your loan. If you sell it yourself you may be able to get the lender to take a “short sale” and accept the amount of the selling price. You would still owe the HELOC but it is less than the mortgage and the HELOC together.

...answered by Jeanne R on August 16, 2011 @ 1:04 pm

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I think it depends on your situation and you need more professional advice than you will receive here.

Are you TRYING to keep the house? If you are, is that realistic or are you just hoping to make things easier on you/kids/life? If you can really afford it, you might be able to work something out with the lenders. They do NOT want your home, trust me. Also, I’m not sure you will keep your house with bankruptcy and you certainly won’t be buying one anytime soon and it may be difficult to rent with a recent bankruptcy.

Consult a tax attorney and see what the best options for you are today but also what makes the most sense for 5 or 10 years from now – they may not always be the same thing.

...answered by Joe K on August 16, 2011 @ 1:10 pm

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Depending on your circumstances, there could be advantages either way. If you have no other debt, and you still cannot afford your house payments, then bankruptcy probably won’t help you much.

Before you make a decision, contact the National Foundation for Credit Counseling. They will provide you with unbiased information to help you make an informed decision that will be based on your individual circumstances, and there is no cost for using their services.

You can reach the NFCC at 1-800-388-2227 or go to They have a homeowner crisis resource center offering immediate assistance for homeowners who want to avoid foreclosure or are concerned about their ability to make their mortgage payments.

Selling your house is another option, but if you cannot sell it for the amount of your mortgage loan and HELOC combined, your only other option is a short sale. If, however, the HELOC lender is not the same lender as the one who holds your mortgage, they probably will not agree to let a short sale go through because they won’t get any of their money back.

...answered by doreen k on August 16, 2011 @ 2:04 pm

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You should talk to a bankruptcy attorney to find out which is better. But as a few other writers have suggested, there is another option. If you file bankruptcy under Chapter 13, you won’t lose your home, if you can make the payments. With Chapter 7, you’ll lose your house. Obviously with foreclosure, you lose your house. Since you aren’t against losing your house, you should definitely try to sell it. And, if you have a HELOC, chances are that you need to sell for less than you owe to move the house quickly. That will require a short sale.

How do you do a short sale? Well, if you’re doing it right, you put together a large package of documents to send to the bank that demonstrates the decreased value of the property and your inability to pay. You, of course, also need a buyer. But you can submit everything except the contract and the HUD-1 to the bank in advance. We have an information product that will walk you through all of the steps necessary and show you how to fill out the forms, line by line.

...answered by ? on August 16, 2011 @ 2:38 pm

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