Bankruptcy after foreclosure

dlm1113 · ‎01-18-2011

I am new to this forum and have definitely learned A LOT of information about FICO scores and credit. For that I thank you. I know that bankruptcy is as bad as you can get on a credit report, but we don't know what else to do.

In 10/08 we lost our home to foreclosure and we have been trying to pick up the pieces ever since. I wish I would have found this website then. We had a 1st and 2nd mortgage where the 1st mortgage was foreclosed on. The bank has sent us statements once in a while trying to collect the 2nd mortgage of $72000 which is of course on our credit report as a bad debt as we are not paying them since we no longer have the house, nor can we afford it with our rent and bills. Since this account is still open and it won't come off of our report until 2014, would it make since to file bankruptcy (ch 7)? Between me an my husband we have like almost $100,000 in past due debt including this 2nd mortgage.

We do have a couple of accounts that have been paid on time fore the past 1-2 years. We were thinking that since our credit is already bad (500-530, which is actually better than I thought it was) that if we file BK7 our score would not get too much worse. Then we could rebuild on the current accounts. Would the Bankruptcy on our credit report totally slow down the effectiveness of paying on time for the next few years even with low balances and on-time payments? Would that constantly hurt the score no matter how well we pay our bills?

I hope this is not too confusing. I just can't see paying all of that money since most are in collections or past due.

Thanks

IOBA · ‎01-19-2011

Tough one to answer.

My suggestion is to contact the bank and talk to them about the second mortgage. The debt isn't going away... the bank might be able to work with you. It would be (in my opinion) better to negotiate and pay something than to file BK.

But, honestly, it comes down to what you choose to do. What can you do?

I am sorry to hear about your foreclosure.

Anonymous · ‎01-21-2011

@dlm1113 wrote:

I am new to this forum and have definitely learned A LOT of information about FICO scores and credit. For that I thank you. I know that bankruptcy is as bad as you can get on a credit report, but we don't know what else to do.

In 10/08 we lost our home to foreclosure and we have been trying to pick up the pieces ever since. I wish I would have found this website then. We had a 1st and 2nd mortgage where the 1st mortgage was foreclosed on. The bank has sent us statements once in a while trying to collect the 2nd mortgage of $72000 which is of course on our credit report as a bad debt as we are not paying them since we no longer have the house, nor can we afford it with our rent and bills. Since this account is still open and it won't come off of our report until 2014, would it make since to file bankruptcy (ch 7)? Between me an my husband we have like almost $100,000 in past due debt including this 2nd mortgage.

We do have a couple of accounts that have been paid on time fore the past 1-2 years. We were thinking that since our credit is already bad (500-530, which is actually better than I thought it was) that if we file BK7 our score would not get too much worse. Then we could rebuild on the current accounts. Would the Bankruptcy on our credit report totally slow down the effectiveness of paying on time for the next few years even with low balances and on-time payments? Would that constantly hurt the score no matter how well we pay our bills?

I hope this is not too confusing. I just can't see paying all of that money since most are in collections or past due.

Thanks

IOBA is correct. Calling the bank to see if you can work something out might be a good option.

Generally, I wouldn't file BK unless there was a chance of them suing you over the debt. The creditor has a limited period of time within which after you have first stopped paying to try and sue you. Check your state's statute of limitations.

If you are unable to pay, if the debt is still within the statute of limitations, if the creditor will not work with you and if you have assets that can be attached / garnished if they obtain a judgment against you, then I might consider bankruptcy. Consulting with a local bankruptcy attorney or two might be a good idea.