Bankruptcy Facts & Foreclosure Options

Note! The following information should not be relied upon as legal authority. This information should supplement, not substitute, for the advice of competent legal counsel.

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Here are some facts to consider about bankruptcy:

Filing bankruptcy can be expensive: Court costs and attorney's fees add up, and are non-dischargeable. Depending on your situation, this is money that potentially could be spent bringing past-due accounts current, or making payment arrangements.

You may lose property: If your assets are worth more than state and federal exemption guidelines, they will be liquidated and the proceeds divided up among your creditors. This can include your home, car, heirlooms, and jewelry. If theirs any deficiency (meaning if your home and assets are liquidated and don’t meet what’s expected to divide amongst creditors) you will have to pay off.

It doesn't solve spending problems: Bankruptcy won't be much use if you spend more than you make. Because credit is available even after discharge (usually with astronomical interest rates), many people quickly descend into debt again. Sadly, 87% of all bankruptcy will lose homes. 70% to 80% of the chapter 13 bankruptcies lose their homes. Only 3% homeowners make it. Almost 50 percent of all people who file do so again as soon as the law allows (six years).

Not everything can be discharged: You can only walk away from such unsecured debts as credit cards and signature loans. So if a good portion of what you owe consists of student loans, tax debt, legal fees, or back child support, bankruptcy won't help.

Bankruptcy will stay on your credit report for seven to ten years: That's a daunting time frame for most people. The damage to your credit report can prevent you from renting an apartment, buying a home or car, or even acquiring life insurance. And many employers are now pulling credit reports to determine a candidate's responsibility and stability, so even your future job may be at stake.

Instead of filing bankruptcy: Assistance is available to help make a logical decision and inform you of foreclosure options. There usually exists a serious financial reason that leads to foreclosure, which must be identified and dealt with. Money management skills, family problems, or illness must be overcome in order to secure your housing.

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