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Ok. My little brother is in a tight spot. He's several months behind on his house payment and he lost his job a few months ago. He's facing foreclosure among other things and he was asking me if filing bankruptcy would be a better option. I don't know what to tell him and he has an appointment with an attorney on monday. The house has been on the market for a while now. Any thoughts on this matter? I thought bankruptcy stayed on your record for a long time but I don't know about foreclosure. Thanks for any suggestions or ideas!
 

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In my opinion (I an neither a lawyer of financial planner) foreclosure is better.

Go to http://www.daveramsey.com/the_truth_about/bankruptcy_3018.html.cfm to read about the consequences of bankrupcy. It's not good. Bankruptcy is forever.

Has your brother explained the situation to the bank? Does he owe more on the house than what it is worth? What are his possibilities of employment in the next 1 to 3 months? These factors and more will determine how much the bank will work with your brother.

-- Dan Meyer :coffee

P.S. Has your brother filed for unemployment? It's not much, but it can help make the house payment...
 

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If my memory is correct, after filing bankruptcy, any future transactions have to be done as cash....he will not be able to use credit cards, and it will stay that way for 7 years.....again, this is as I remember it, unless the law has changed.

I'm sure there is more to it, but that's the basics.....the lawyer will be the best one to advise him....Oh, and there are lawyers that specialize in it....might be better to try one of them.
 

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I have been a Realtor for over 10 years now and have helped MANY people in this same position. There are no easy answers and a lawyer could be "handy" here. The first big issue is that he negotiates NOTHING with a creditor of any kind without getting them to put the terms in writing. I've seen many people negotiate settlements with credit card companies ( even payment arrangements must be in writing) then the credit card people sell the remaining debt to a collection company and the settlement "agreement" is garbage. People get tormented for years due to this. Without terms in writing, NO agreement with these people will hold up.
The BK will hurt for 2-3 years then he will slowly be able to get credit again. First secured credit cards then regular ones although at higher rates. Currently to get a mortgage you have to be more than 24 months removed from the BK and the rest of your credit has to be "perfect" with regards to NO late payments for the last 12 months and you may have to have a higher down payment.
A BK stays on your record for 7 years, but it MAY stay on longer if you don't stay "on" the credit reporting companies ( who are all SLIME btw) If you don't, they can ( not legally) "re age" the debt remaining and it can stay on longer.
A Foreclosure will hurt for 2-3 years and getting your next mortgage will be harder. A higher rate and possibly a higher down payment should be expected. BOTH will "ding" his credit for at least 200 points and it will be an uphill climb. Many banks will never lend to someone who had a Foreclosure with them, but others will.
If he has a choice the Foreclosure will be a little less painful as his current credit ( Credit cards and vehicle) can help him rebuild his credit faster. The BK will most likely trash it all, making getting turned around that much harder.
Hope this helps.
 

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Bankrputcy is F O R E V E R !

While credit reporting agencies might keep a bankruptcy on file for 7 years, consider the following from the URL I posted above: http://www.daveramsey.com/the_truth_about/bankruptcy_3018.html.cfm

"Loan applications and many job applications ask if you have ever filed for bankruptcy. Ever. If you lie to get a loan because your bankruptcy is very old, technically you have committed criminal fraud."

For what it's worth.

-- Dan Meyer :coffee
 

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Dan, this is true, a BK is a life altering event and you would be not telling the truth on a job application if you were asked this question. Few people however are ever faced with this question as there is a small number of jobs a BK would eliminate you from consideration for. Many employers are already doing credit and back ground checks prior to an offer anyway so they know where you stand. There are many people in surprising lines of work who were honest til they died yet they had a BK. Mr. Ramsey tends to run a hard fear factor for some people
His claim of " I even sold rental property that was losing money to investors by showing them, with very sophisticated internal rates of return, how they would actually make money! " Should raise ethical questions for us all. He's bright but if he did that then, what is he willing to do now? I would take Ramsey, like many other experts who sell fix yourself plans with a grain of salt.
http://www.daveramsey.com/the_truth_about/debt_3036.html.cfm

The quote is in the 4th paragraph.
 

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Ok. My little brother is in a tight spot. He's several months behind on his house payment and he lost his job a few months ago. He's facing foreclosure among other things and he was asking me if filing bankruptcy would be a better option. I don't know what to tell him and he has an appointment with an attorney on monday. The house has been on the market for a while now. Any thoughts on this matter? I thought bankruptcy stayed on your record for a long time but I don't know about foreclosure. Thanks for any suggestions or ideas!
Neither is good, but I believe bankruptcy is worse...especially a voluntary bankruptcy.
But the real question is what it behind all of this. You said he was several months behind and lost his job a few months ago. What got him behind? Lifestyle? Overbought when he bought a house? Several financial advisors have said that a house is a great investment IF it doesn't wreck your budget. Otherwise, rent until you can afford it. He may just have to take the lumps and hopefully learn from them. That's not trying to be harsh, it's being real!!
I hope there aren't kids involved. If so, the answer is do (legally) WHATEVER IT TAKES!! Your name is not worth ruining, in the end it is all you've got. Go to the bank/lender and talk to them. Get a second job (hard in this economy to be sure, but there are jobs out there). Sell off some stuff. Whatever it takes.
BTW, I like Dave Ramsey's approach. You didn't get into debt overnight, you won't get out of it overnight. I wish I had learned some lessons a long time ago. I was without a job for about a year, living off half-time, what my wife made, and the kindness of relatives. I hated that.
Don't take anything I've said as being cruel or mean-spirited. I just see people every day that "just don't have enough" pay their utility bill, but at the same time time are taking calls on their Blackberry and driving a new car, so forgive me for being a bit jaded. :m2:
 

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Neither is good, but I believe bankruptcy is worse...especially a voluntary bankruptcy.
But the real question is what it behind all of this. You said he was several months behind and lost his job a few months ago. What got him behind? Lifestyle? Overbought when he bought a house? Several financial advisors have said that a house is a great investment IF it doesn't wreck your budget. Otherwise, rent until you can afford it. He may just have to take the lumps and hopefully learn from them. That's not trying to be harsh, it's being real!!
I hope there aren't kids involved. If so, the answer is do (legally) WHATEVER IT TAKES!! Your name is not worth ruining, in the end it is all you've got. Go to the bank/lender and talk to them. Get a second job (hard in this economy to be sure, but there are jobs out there). Sell off some stuff. Whatever it takes.
BTW, I like Dave Ramsey's approach. You didn't get into debt overnight, you won't get out of it overnight. I wish I had learned some lessons a long time ago. I was without a job for about a year, living off half-time, what my wife made, and the kindness of relatives. I hated that.
Don't take anything I've said as being cruel or mean-spirited. I just see people every day that "just don't have enough" pay their utility bill, but at the same time time are taking calls on their Blackberry and driving a new car, so forgive me for being a bit jaded. :m2:
That is a good description of many of the people I deal with. They have "issues" with their current mortgage, but to tell them to skip the expensive vacation or maybe sell something (I had a guy with two cars, Harley, two ATV's and a boat. Selling any of them was out of the question) Ramsey has good points, but try finding anyone with a successful business that did not and does not have credit/debt. It's all about keeping it sane. I bought half the $ house I qualified for. We love our house and it's not small ( 1980 sf, less than a year old) but we also love the payment and rate. We often make double payments and are on track to own it in 8 years.
 

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A few years ago my brother was in the same situation.

Lost his job.

Used credit cards to pay his bills.

Had a mortgage no income. No unemployment because his employer gave him a "medical layoff". With that if your not healthy enough to look for work your "out of luck". For a while he was even on assistance.

He was finally able to get a job but by that time he was so far behind in his bills that the creditors were after him. He could have filed for retirement (enough years/hrs/credit) from his previous employer but due to circumstances (?). Seems he hated the idea of giving 40% of his pension to his ex. Can't say as I blame him.

When they repo'd his truck (with all his woodworking hand tools in it) he called me. I emptied "my" savings account to bail his truck out. Since it was my brother I didn't feel I should use my wife & my money.

After setting down with him I was able to finally get him to get off his dead *ss & do something.

After talking with an attorney he filed for bankruptcy. Rather than forgive his debts or reduce them he had to repay the monies but the creditors couldn't go after his assets. Yes he has to use cash and the money he owes is taken out of his pay check every week but he's finally seeing light at the end of the tunnel.

Since his house was bought before the bankruptcy it's protected. So he has a place to sleep and he's still building equity in the house.

He has also finally listened & filed for his retirement so once that money starts coming in he can pay off everything sooner.

Just some info.
 
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