Most homeowners want to avoid foreclosure if at all possible. If you are struggling with paying your mortgage, it is important to explore all of your available options. This blog will focus on the pros and cons of filing for bankruptcy versus pursuing a short sale of your home. While both choices can be beneficial, deciding which is better for you depends on your unique circumstances. Below are a few questions to ask yourself:
Am I under a deadline?
The short sale process can be extremely time-consuming. There are several different parties that must be involved in the negotiations, which can make reaching an agreement difficult. Additionally, at the end of the short sale the homeowner does not have a guarantee that the sale will successfully close. A personal bankruptcy filing provides the homeowner with immediate relief. The automatic stay halts all types of collection activity, including foreclosure lawsuits. A typical Chapter 7 case lasts three to five months and a Chapter 13 case lasts three to five years. Thus, bankruptcy provides a homeowner time to negotiate with their mortgage lender and/or to cure delinquent payments. Once a bankruptcy case is completed, the discharge order cancels all or a large portion of your debt.
Will I be liable for the deficiency balance?
In a short sale, there is always a deficiency left due and owing to the mortgage lender. The deficiency is the amount that the sale of your home is “short” on paying the mortgage loan in full. Depending on where you live, the remaining deficiency balance can create a financial issue for you. In many states, there is requirement that the lender waive the deficiency. However, in California, we have anti-deficiency and short sale protection laws. In other words, in most cases if a mortgage lender agrees to a short sale, it is for payment in full. The homeowner is not liable for any remaining balance due after the closing of the sale. If the homeowner files a bankruptcy, he or she can usually discharge all of the deficiency balance due on a mortgage loan.
Is my mortgage my only debt?
If your mortgage debt is the sole cause of your financial struggle, a short sale will help your financial situation. However, if you have credit cards, medical bills and other forms of debt that negatively impact your financial stability, filing a personal bankruptcy can allow you to handle all of your financial struggles at once. Bankruptcy is the most comprehensive means of dealing with your debt.
For help in obtaining the debt relief you need, choose a thorough California Debt Settlement Attorney with offices in Jackson and Folsom. Contact us today to schedule a comprehensive consultation.