Bankruptcy and Foreclosure: Should I File Before or After Foreclosing?
There are a lot of variables that go into bankruptcy and foreclosure, but one thing you can be sure of is that it won’t be a fun process. While both bankruptcy and foreclosure can be beneficial or necessary for you and your family, nobody wants to have to go through the process or feel the weight of the ramifications.
With that being said, it can be easy to check out during the process. It is important for you to stay engaged as you look at the prospect of bankruptcy or foreclosure. One of the common questions asked by people facing one or both of these events is whether or not you should file for bankruptcy before or after foreclosure. In today’s post, Groce & DeArmon, P.C. will take a look at the question and provide you with answers.
Where Are You At Financially?
The decision to foreclose or file for bankruptcy first will largely depend on where you are in both processes. Some people know they are going to lose their home but aren’t sure if they are going to file for bankruptcy. Others might be file for bankruptcy to help save their home.
This will have a major impact on what actions you should take in general, regardless of timing. If losing your house isn’t a sure thing, you shouldn’t file for bankruptcy to save that home just yet.
Deficiency From Foreclosure
The first thing that you should do when faced with bankruptcy and foreclosure is evaluate your financial situation in its totality. Once you know where you are, the decision will become clearer, especially with legal counsel from a law firm such as Groce & DeArmon. If you are, however, forced to foreclose and file for bankruptcy, it will most likely benefit you and your family to file for bankruptcy first.
There are several reasons for this, but the most applicable to most situations is the deficiency that comes after foreclosure. In short, deficiency is the difference between what you owe on the home and what it is sold for in foreclosure. In some states, lenders are able to collect the deficiency from you and even if they forgive the deficiency, you may owe taxes on that forgiveness.
Benefits of Filing For Bankruptcy First and After Foreclosure
After foreclosure, if your lender comes for the deficiency of your mortgage, a bankruptcy filing will discharge your deficiency debt. However, if you file after your deficiency is forgiven, you might not be able to get out of taxes owed on that deficiency.
With all that being said, the biggest benefit of filing for bankruptcy first is that your mortgage debt will be discharged. You won’t have to wait and see if your lender forgives your deficiency or even have to wait around to see what your deficiency is.
Contact Groce & DeArmon, P.C. For Bankruptcy and Foreclosure Help
If you are looking at bankruptcy and foreclosure, you need to be represented and advised well. At Groce & DeArmon, we specialize in bankruptcy and foreclosure and we want to help you find the best solution. Give us a call today at (417) 862-3706 or contact us online for more information.