While many aspects of the real estate industry are positive, bankruptcy and foreclosure are two things you want to avoid.
Since the economic recession of 2008, our nation has seen some pretty difficult times that resulted in retractions from many markets and we saw foreclosures and bankruptcies of all kinds. Financial crises are extremely disastrous and cause these horrible things to happen to individuals and families all over. If you are faces with such a crisis, there are two options for you as a homeowner; bankruptcy or foreclosure.
Bankruptcy differs from foreclosure in that it gives people a fresh start. It allows for a discharge of debts by making a plan to repay those debts. Looking for a home after a foreclosure can be extremely difficult due to your now poor credit score. There is still plenty of hope after bankruptcy, and usually only takes two years to find a low-interest rate mortgage. It is advised to make sure that you have secured credit cards to prove you are trustworthy to receive another loan. This can also be done by making an installment loan where you make monthly payments, this way you can prove to banks that you are able to pay back your loan.
Foreclosure is much more serious in the fact that you forfeit your home to your mortgage lender by defaulting. This then satisfies your past debts and should be avoided at all costs. Foreclosures ruin your credit scores for years on end and make it near impossible to gain another mortgage. This is usually worse than bankruptcy because it usually means there is no coming back in terms of you making any of your payments. This is also why foreclosures often have a larger impact on your credit score, because you are defaulting the payments and your ownership of the property.
In addition to foreclosures and bankruptcies, some people can choose to short sell their properties, but that causes a loss as well. A short sale is the attempt to sell real estate where the proceeds of the sale will fall short of the debts owed on the property. If holders are able to accept this loss, a sale can usually be made. A short sale results in a negative credit report, but people have a shorter waiting period for a new mortgage in comparison to those who file bankruptcy or go into foreclosure. It is obviously advised to try and avoid all of these options, but there are different scenarios to choose from if you find yourself in a financial crisis.