I need help! Loan with former b/f going into foreclosure. What can I do?
Question:
1) Which is worse: bankruptcy or foreclosure?
2) How will either affect my spouse? We have credit cards and a home jointly.
3) What happens if the house is sold and we don't get enough to pay off the loan?
4) Do I have any other options?
Please help! I know this is going to affect my credit, but I'm trying to find the least painful option. Thanks!
Answer:
Why would you file bankruptcy? You are not trying to save the house, since you have no way to make the payments. BK only staves off the foreclosure, it doesn't prevent it if there is no money for payments.
1) Bankruptcy is slightly worse than foreclosure, since it will stay on your record for 10 years vs. 7 for a foreclosure. And you will always have to answer 'Yes' to the question "Have you ever filed for bankruptcy?"
2) You and your spouse would be smart to close any joint credit card accounts you have before you declare BK, if you do, either by transferring them into his name or by closing them completely. If you alone declare BK, it should not affect him, if it is structured correctly and your accounts are separated as much as possible.
3) Is the house even for sale? If it's going into foreclosure on Monday, I doubt there will be time, but if your ex-BF does manage to sell the property but can't pay the entire loan, it's called a 'short sale' - the bank will have to agree to take less than owed. It is only slightly less damaging to your credit record than a foreclosure.
4) At this point, probably not. If there is any equity in the home, you could try some of the "We buy homes for cash" places, but they generally will only give you about 70% of the home's value, so if there is no equity, you would have to get the bank and your ex-BF to agree.
In either a foreclosure or a short sale, it is possible that you will get a 1099 for 'forgiven' debt. You must declare it as part of your income and pay taxes on it, or you will be in trouble with the IRS, too. So start saving your money to pay 25% or so of whatever your half of the forgiven debt is.
Take this guy to court.
If you haven't told your husband about this house, you best tell him, because the foreclosure will show up on your credit report. Also, if the home sale does not cover the cost of the mortgage and legal fees, the bank will go after your and/or your husband's assets. Foreclosure is not as bad as a bankruptcy. In a bankruptcy, you will have to list all sources of income (including your husband's) as well as all assets (including your husband's). It is not a pretty situation.
Case in point boys and girls. never, ever, have joint title or loan with a live-in partner, unless the partner is your spouse or immediate family member.
I think you do have some other options. Don't be defencive go on the offence.
Tell your husband and tell your bank. There maybe a way to consider this a wedding gift from your x b/f, working with your bank you may be able to take over the deed for the home and have a nice little investment property cutting the x out of the picture.
Your name is on the papers and the worst that can happen is the foreclosure will give you a black mark on your credit rating. It's definitely not going to hurt to try to turn a bad thing into a good thing. You must have a bit of equity in your present home as well as the home in question. Get your husband down to the bank, now, get control of the house, put a coat of paint, do some minor repairs if needed and sell it. You could end up being thousands of dollars ahead on this deal.
If you don't do anything you are going to lose, go on the offence and you could win.
Good luck
Unfortunately if you signed your name to the mortgage, you are responsible. It doesn't matter if you live there, like the person there, whatever. It is still your obligation. If they can't get the money from him, they will come after you for it.
Your current home will not be taken by the lender, but you must pay the money.
If they sell the house for less than owed, you and/or your ex-boyfriend will have to pay the difference. Try to contact the lender and arrange a short sale. If you can't do that, contact a local credit union for a loan in the amount of the difference.
Good luck!
If the bank is getting ready to start a foreclosure, then you still have time to try and rent the house, or come up with the back notes, because the foreclosure procedure will take at least a month, I would let them foreclose, that will keep your wife credit good since her name is not on the loan.
If you file bankruptcy it will show up on moth of your credit files, what the heck they will both mass your credit up for a while and maybe not it depend on how good your other credit is.
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