Why Bankruptcy Won’t Prevent Foreclosure

I subscribe to a website that tells me which duplexes in the Twin Cities are facing a Sheriff’s Sale.

Every now and then, I see a property listed where the Sheriff’s Sale has been delayed because the property owner is filing for bankruptcy.

I don’t know if the duplex homeowners are doing this with the hope of avoiding foreclosure or not. But if they are, it won’t work.

Declaring bankruptcy may temporarily halt foreclosure proceedings, giving the property owner an opportunity to reorganize debt. However, it will not stop the foreclosure process.

Both bankruptcy and foreclosure stay on your credit report for a minimum of 7 years. Imagine giving yourself the double whammy of both.

For many property owners, mortgage payments are the biggest portion of their debt.  So when considering filing for bankruptcy, it may be useful to consider whether or not the financial strain would be eliminated or reduced if it were eliminated or reduced.

Duplex owners who can demonstrate a monthly financial shortfall may qualify for a short sale. While this too has some impact to credit, it is nowhere near as damaging or enduring as a foreclosure.

If you’re considering bankruptcy because of overwhelming debt, including your mortgage payments, give me a call. As a CDPE agent, I can help you explore your financial options.

You may discover bankruptcy isn’t inevitable after all.