All lenders take bankruptcy very seriously as it leads to default in payment. A lender cannot resort to foreclosure when the borrower files in the court that he or she is bankrupt. Whenever such problems affect a borrower he should get help from a loan modification specialist to save himself.
A foreclosure and a short sale have similar negative effects on the credit rating of a borrower. A foreclosure is considered worse as you are not cooperating with the bank to which you owe, to settle the debts. A short sale in other words is forgiving the debt. The bank agrees to overlook what your owe to the Bank and settle with the amount received after sale.
How Bankruptcy can protect the property of a borrower?
If a borrower goes to court and files for bankruptcy, the court can protect the borrower from foreclosure action. Lenders cannot sell the property once you have filed for bankruptcy. It acts as an acknowledgment that you are bankrupt and cannot currently pay the debt. To prevent any problem it is better to approach loan modification companies to reset the instalment as the worth of the house is less than the amount of the loan.
Ways in Which Bankruptcy can Ruin Your Credit
When you are bankrupt no lending institutions will give you loans as they risk default in payment. Most of the lending institutions have to check the financial status of the borrower and the source of income to know whether he can pay back the loan. Many borrowers fail to qualify under this as they do not have stable source of income.
This provides an indication of bankruptcy which spoils your score of credit. People having high credit score should be very careful when they have loans which tend to go into default.as it will smash their credit score.
People should take great care of their credit rating as it will hamper them from getting loans and avoid filing for bankruptcy