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benchman10 · Joined: 08 Oct 2007 Posts: 3 3.00 Dollars($)

I'm in a situation that seems to be unique. Let me try to explain.

I have 2 investment properties, that are now in negative equity and still going down. I have been supporting them for over 2 years now, but getting very close to not being able to pay for them any longer. Have lost a lot of money on these investments.

One of the properties qualifies for a deed in lieu as its been on the market for longer then 3 months, the other, unfortunately has not. I have not been actively trying to sell it as nothing is selling so I did not bother to put in up for sale.

I'm now facing a dilemma, should I deed in lieu the properties, or foreclose or go to bankruptcy court. I still do not entirely understand how my credit is effected in each scenario.

Thanks in advance for any positive advice that you can give.

Caron

Hi Benchman,

Welcome to our forums.

The credit effects of foreclosure, deed-in-lieu and bankruptcy are all damaging no doubt. But yes, there's a difference in how a deed-in-lieu and foreclosure can affect a borrower. Know how foreclosure affects credit.

In general, a deed-in-lieu has less negative impact as compared to foreclosure. Know more....

As far as bankruptcy is concerned, it is indeed damaging if it's chapter 7, a slightly less if it's chapter 13. This is due to the fact that in the former case, you need not pay anything and get rid of your debts through the sale of your assets. But in chapter 13, you can start paying off apart of your debt and this implies that you are trying to get current on your loans, which is positive and hence your credit score is affected comparatively less than that of in chapter7. However, in general, a bankruptcy lowers your score by 150-200 points.

Good luck

jenkin7 · Posted: Tue Oct 09, 2007 4:47 am Post subject:

Hello Benchman,

I think deed-in-lieu is the better option. It will have less negative impact on your credit than foreclosure and of course, bankruptcy.

evolovik26 · Posted: Tue Oct 09, 2007 7:05 am Post subject:

Ill disagree with jenkin there as far as credit impact is concerned I would say the bankrupsy is the least impact you can have. Once the BK has been started your creditors can no longer report your debt delinquent so you get the hit from bk and thats it (most ppl can rebuild in 2 years) in all other situation your bank wouldnt even concider negotiating till you are 2-3 months behind and then your credit is shot. Add a foreclosure or deed in lieu and you are looking at a 7 yr record and your credit way below radar.

benchman10 · Joined: 08 Oct 2007 Posts: 3 3.00 Dollars($)

Thanks for the advice, keep it coming.

I'm thinking the deed in lieu is going to cost me in tax burdens plus keeping the payments on time (more bleeding). The bankruptcy can give me a new start. My primary home and existance is not at risk, just my investments. I can afford to pay my monthly costs.

I have had conflicting opinions from lawyers on what assets are at risk in a Chapter 7 bankruptcy. The 2 main concerns for me are:

1. Does my wife's assets get involved in the bankruptcy (even though she is not on the mortgages and I do not want to bankrupt her)
2. I have a side business (S-Corp), and am 100% owner, does those assets get exempted?

Thanks in advance

jenkin7 · Posted: Wed Oct 10, 2007 2:37 am Post subject:

1. Hello Eugene, as far as I know, chapter 7 remains in the credit report for 10 years while chapter 13 is there for 7 years. So, will that not damage the report as well as my eligibility to qualify for any other loan?

2. Benchman, regarding your question I can say that it might involve your wife's asset if there is any non-exempt jointly held marital property. She can lose her interest in a jointly held marital property if you are in a community-property state.

If you can tell the state where you live then only I can help you to find out whether your side business is exempt or not as it depends on the state laws

evolovik26 · Posted: Wed Oct 10, 2007 6:09 am Post subject:

to jenkin - BK is on your record for up to 11 years but it doesnt affect the credit rating past the initial hit. And the first thing that is done when filing a BK is all the companies recieve a note from the court preventing any activity against the borrower so there is no further credit damage. As far as being on the credit report (there is a record but most lenders will not look at anything over 2 years ago) its better to have a bk and 650 score then no BK and 480 score

benchman10 · Joined: 08 Oct 2007 Posts: 3 3.00 Dollars($)

I'm in GA

Just got back from a lawyer yesterday. They were saying that I can treat this as a business bankruptcy as the properties were for investment under sole propertiership.

jenkin7 · Posted: Thu Oct 11, 2007 3:46 am Post subject:

1. Thanks Eugene for clarifying my question.

2. Yes Benchman, you may file a business bankruptcy or chapter 11 if you want to continue business and repay the loan at the same time. In order to be eligible for filing chapter 11 in Georgia, your debt has to exceed the limits of chapter 13 which is $250,000 secured and $750,000 unsecured but total less than $2,000,000.

You should consult a lawyer for further assistance.

Guest

I dont know if I am going to make sense or not. This last year our daughter was diagnosed with a very rare disease and has required a couple of brain surgeries and treatments. Because of this, I am no longer able to work to care for her and we were left 30k in medical bills plus credit cards that we used for living while we were in NY or Seattle for the various treatments (we live in Idaho).

My question is, because we cannot afford our mortgage because of my loss of income can we do Chapter 13 bankruptcy and Surrender our home? Or do you have to do Chapter 7 to do foreclosure. I don't quite get it because everything about Chapter 13 says to file it to stop your home from going into forclosure however we feel like we should try to repay the debt we aquired through Chapter 13. That and we would like to keep what assets we do have which we would not be able to through Chapter 7. Can someone explain this to me? Thank you greatly!

adonis · Posted: Fri Dec 19, 2008 12:37 am Post subject:

Welcome April,

Chapter 13 also helps in re-organizing your debts. You will be able to retain your property even after filing chapter 13. In this chapter of bankruptcy, you will be a given a new payment plan by the lender which will help you in repaying the debts within the next 3-5 years. Whereas in chapter 7 bankruptcy, the repayment of debts are done from the sale proceeds of the debtor's assets. However, you will be able to reaffirm your debts in Chapter 7.

However you should note that there are various other ways to avoid foreclosure. To know more about them, check out the following link:
http://www.mortgagefit.com/foreclosure/17ways-avoid.html

Guest

If we do a deed-in-lieu would it affect other assets?

jameshogg · Posted: Fri Jan 16, 2009 9:55 pm Post subject:

Hi tina,

If you go for a deed in lieu, the deficient amount resulting from the sale of the property is forgiven by the lender and you will have to pay taxes on that forgiven amount. I do not think your other assets will be affected due to this. To know more about deed in lieu, check out the given link:
http://www.mortgagefit.com/deed-lieu.html

Thanks

Guest

I have two rental properties, a house in MN and a condo in FL. I lost my job am still current on the house but not the condo. I tried to short sale and deed in lieu, but the PMI won't approve a deed without $10,000. Now the association is close to foreclosure, too. Should I just file for bankruptcy and get it over with.

adonis · Posted: Mon Jan 19, 2009 10:27 pm Post subject:

Hi Margaret,

You can definitely file bankruptcy before foreclosure but remember it will affect your credit badly. It would have been better if you could have taken a personal loan of $10,000 and go for either a deed in lieu or a short sale.

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Deed in lieu vs foreclosure or bankruptcy