How a Walworth County Bankruptcy, Foreclosure, and Short Sale Affect Credit Score

If you go through with a short sale, deed-in-lieu of foreclosure, or a foreclosure, your credit score will drop 85 to 160 points (per FICO). If you file a Walworth County bankruptcy, your credit score will drop 130 to 240 points. However, don’t judge a book by its cover. A Walworth County bankruptcy is not necessarily the worst thing to do in these situations. Many other factors must be taken into consideration before making a final decision on what action is best for you.

Critical Criteria Important When Considering a Walworth County Bankruptcy, Foreclosure, or Short Sale

If you decide to go through with a foreclosure, you run the risk of the lender coming after you for more money. You may owe the lender the difference between the price your home sold for at public sale and what you still owe on your mortgage. Let’s say your home has a fair market value of $200,000 and it sold at public auction, after foreclosure, for $75,000. The financial lender can seek a judgment against you for the difference, which would be $125,000. That’s a lot of money, and another judgment on your credit report. However, if you decide to file a Walworth County bankruptcy instead, the $125,000 you would have owed the bank could be discharged in the bankruptcy proceeding and you would owe nothing. You do not even have to pay taxes on the forgiven debt. In this situation, a Walworth County bankruptcy looks like a much better option.

How a Walworth County Bankruptcy, Foreclosure, and a Short Sale Effect a Future Home Purchase

Do you plan on buying another home in the future? If so, then allowing a foreclosure to go through is not your best option. If you decide upon a bankruptcy, short sale, or deed-in-lieu of foreclosure, you will qualify for a home mortgage much sooner. Most banks follow Fannie Mae and Freddy Mac guidelines. Under these guidelines, if you place 20% down on your next home, you should qualify for a mortgage two years after performing a short sale or deed-in-lieu of foreclosure. If you have 10% to put down on a new home, you should be able to qualify for a new mortgage in four years. If you file bankruptcy, you will qualify for a mortgage two to four years from the date of your bankruptcy discharge, assuming you have been making all of your payments on time. If you let the foreclosure takes its course, you would not qualify for a new mortgage until seven years from the date of the foreclosure judgment. In addition, if the lender pursued a deficiency judgment against you for the difference between the price the home sold for at auction and how much you owed on the mortgage that deficiency judgment would have to be paid in full before you could close on a new home. In summary, if you are planning to purchase another home in the future, foreclosure may not be your best option.

Which Provides the Best Fresh Start Option: A Walworth County Bankruptcy, Foreclosure, or a Short Sale?

Although a Walworth County bankruptcy filing may initially drop your credit score, bankruptcy is the best option for a fresh start. During the time you are waiting to purchase another home, you can be rebuilding your credit and improving your credit score. Each person’s situation is different. If you are facing foreclosure, please seek advice from our real estate and bankruptcy attorneys. Please contact Wynn at Law, LLC for a free, initial bankruptcy consultation. Our experienced Walworth County bankruptcy attorneys can answer your questions and help you decide what the best option is for your specific situation. You can contact our Walworth County bankruptcy attorneys by phone at 262.725.0175 or by email via our website’s contact page. Wynn at Law, LLC has bankruptcy and real estate law office locations in Salem, Muskego, Delavan, and Lake Geneva.

*The content and material on this web page is for informational purposes only and does not constitute legal advice.

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According to the FHFA’s interactive HARP map, there are more than 600,000 home mortgage borrowers in the U.S. who can still reduce monthly mortgage payments through HARP. With interest rates still low, but projected to rise this year, this may be the last chance for homeowners to find some financial relief by benefitting from HARP to reduce monthly mortgage payments.

So far, nearly 3.3 million borrowers have already taken advantage of HARP to reduce their monthly payments and obtain some financial relief. “Extending HAMP and HARP through the end of 2016 will provide real relief for borrowers who continue to face challenges either paying their mortgage or refinancing their loan,” said FHFA Director Mel Watt.

To be eligible for HARP:

1. Your home loan must be backed by Fannie Mae or Freddie Mac.

2. You must have obtained your home loan before May 31, 2009.

3. You must be current on your mortgage payments.

4. You must have a current loan-to-value ratio greater than 80 percent.

5. You cannot reasonably refinance due to home depreciation.

6. Your home is your primary residence.

Changes to HARP have been recently been made. If you previously were not eligible for HARP in the past, you may be eligible now. There were revisions to the program’s loan-to-value calculations. Also, homeowners do not have to refinance with their current lender. Homeowners can refinance with any lender they choose. The typical HARP refinance saves homeowners 35% annually. It’s worth the time to see if you now qualify.

Contact Our Walworth County Real Estate Law Office

If you have questions or need assistance with your real estate matters, contact our Walworth County real estate law office. To speak with our Walworth County real estate lawyer, call 262-725-0175. You can also contact Wynn at Law, LLC via email on our website’s contact page.

*The content and material on this web page is for informational purposes only and does not constitute legal advice.

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Walworth County Foreclosure

Basically, foreclosure is a legal process in which the bank or lending institution attempts to recover the balance owed from the homeowner who has stopped making the agreed upon monthly payments. Foreclosure can be a lengthy process, taking anywhere from 9 months to several years to complete. It can take anywhere from 2-6 months (or more) of missed payments before the bank will file the foreclosure lawsuit with the court and will serve the homeowner with foreclosure paperwork. After the homeowner is served the foreclosure paperwork, he or she has a short period of time to hire an attorney and file an Answer or the homeowner can file an Answer him or herself. While the foreclosure is pending, the homeowner can try to work with the bank to get current, sell his or her home, or entering into a new, more affordable loan with a modification or refinanced loan. Most counties, including Walworth County, offer foreclosure mediation. If no arrangement is made between the bank and the homeowner, a Notice of Public Auction will be posted and the home is sold at a Walworth County Sheriff’s Sale. If a third party person or entity does not buy the property at the Walworth County foreclosure auction, the mortgage lender will buy and the home and it will be listed as a “bank owned property,” by a local real estate office.

Walworth County Deed in Lieu of Foreclosure

Deed in what? That’s what most people say. A Deed in Lieu of Foreclosure is simply a document a homeowner signs with your lending institution stating that both parties agree that the bank will take back the property in lieu, or instead of, going through the foreclosure process. There are many advantages to signing a Walworth County Deed in Lieu, such as: A Deed in Lieu of Foreclosure looks better on a homeowner’s credit report. A Deed in Lieu of Foreclosure saves the bank money it would have spent on an attorney and filing fees during a Walworth County foreclosure process. It’s pretty much a homeowner’s way of saying, “I can’t make these payment anymore.” And, the bank says, “Okay. We understand. We will take the home (your loan collateral).” The Walworth County property deed then goes into the bank’s name and the homeowner is no longer the owner of the home or is responsible for the mortgage payments. Usually, the bank will work with the homeowner to set a date in which the homeowner is to move out of the property.

Walworth County Short Sale

The definition of a short sale is the sale of a home that is sold for less than the mortgage amount that is due and owing. Let’s say you own a Walworth County home and you owe $145,000 on your mortgage. You have the home up for sale. An offer comes in for the home asking you to accept $100,000 for the purchase of the home. Since you owe $45,000 more than the offer price, the bank has to agree to accept this offer to sell the home. If the bank agrees to the sale, the bank may not pursue the homeowner for the $45,000 or the bank may preserve its right to sue the homeowner for the $45,000. Therefore, it is important to understand the bank’s intention before agreeing to a short sale.

If a Walworth County homeowner is behind on mortgage payments and wishes to no longer try to keep their home, the above three options are to be considered: going through the foreclosure process (the real benefit is staying in the home another 1-2 years before the homeowner would have to leave), signing a deed in lieu of foreclosure (this looks better on a credit report and saves the bank money too), or putting the home up for sale and hoping the bank will accept a short sale of the property (this option works well when the homeowner has the time to sell the home). Each circumstance is unique. Walworth County homeowners should seek the advice of a qualified and experienced Walworth County Real Estate Attorney who can better determine which options are best for their situation.

If you need real estate or foreclosure assistance in the Walworth County area, please contact Wynn at Law, LLC. We can represent you in a Walworth County foreclosure matter and/or advise you of the best options for your specific real estate situation. Contact us today for a consultation at 262-725-0175.

*The content and material on this web page is for informational purposes only and does not constitute legal advice.

Photo by Flickr Creative Commons Jeff Turner

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