How to Keep a Foreclosure Off a Credit Report After Bankruptcy
Bankruptcy is commonly used as a method to prevent foreclosure. Surrendering the home allows you to avoid foreclosure. You may also be able to avoid foreclosure altogether by restructuring your debt through bankruptcy. Both foreclosure and bankruptcy can have a serious impact on your credit.
In most cases, bankruptcy allows you to keep foreclosure off your credit as long as you act fast.
- Select the best type of bankruptcy for you. If you are unable to afford your mortgage payment and other debt, Chapter 7 bankruptcy discharges the debt and releases your liability. Homeowners who want to keep their homes and can afford to resume making their monthly payments can opt for Chapter 13 bankruptcy. Arrears must be paid through monthly payments to the trustee.
- File bankruptcy before the home is foreclosed. To avoid having both a foreclosure and a bankruptcy on your credit report, you must act before the home is foreclosed. Even if your home is in active foreclosure, filing bankruptcy temporarily stops the foreclosure by issuing an automatic stay. If you wait to file until the home is foreclosed, the debt will not be discharged. In addition to the major credit consequences, you are liable for the debt, which can result in deficiency judgment.
- Continue making payments to the lender and trustee if you filed Chapter 13 bankruptcy. If you miss a mortgage payment or payment to the trustee, the lender can begin the foreclosure process. Even after you complete the three or five year repayment plan, you must continue making your mortgage payments or risk foreclosure.
- Review your credit report. If you surrender the home in bankruptcy, a foreclosure will not appear on your credit. While you are in default, the lender will likely report the delinquency to the credit bureaus each month. After the bankruptcy is finalized, the loan amount discharged will be reported with a zero balance. Bankruptcy is reported in the public records section of your credit report.
- Dispute any errors. If your credit report shows any balance remaining on the loan after bankruptcy, file a dispute with each credit bureau to launch investigations. The bureau has 30 days to review the information. Any errors must be corrected. Chapter 7 bankruptcy will remain on your credit report for at least ten years. Chapter 13 bankruptcy affects your credit for at least seven years.
Article source: How to Keep a Foreclosure Off a Credit Report After Bankruptcy | eHow.com
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