If you own an investment property, there is certainly a possibility that it might perform badly. It may be because you could not keep it rented, or the prices dropped steeply because of a downward market trend or any other reason. If this happens by any case, you may have to select between a short sale and bankruptcy. These options are not attractive at all, but it will be useful to know the difference between both.
Short Sale
In the process of short sale, the owner of the home or property sells the mortgaged property for less than the outstanding loan balance and pays the sale revenue to the lender. In most cases, the lender too agrees to reduce the loan balance after considering the borrower’s financial condition. In general, short sale is considered to be a faster process than foreclosure. It is less costly too.
Bankruptcy
If you have more than one investment property giving you financial troubles, you can settle for bankruptcy. There are two types of bankruptcy, chapter 7 and chapter 13. In chapter 7 category, you can get rid of almost all your debts and start all over again. While in chapter 13 bankruptcy, you can fix up a repayment plan with your lenders to pay back over time. Regardless of whether you have one property or multiple properties, you can do away with mortgage debt using this method.
Credit Impact
When deciding on an option to choose, look into the credit impact which each will bring about. Short sale will not upset your credit as unfavorably as bankruptcy. It reduces the credit score by around 120 to 130 points. Contrarily, bankruptcy will lower your credit score by somewhere between 355 and 365 points.
Benefits
If you have just one investment property which is performing poorly, the short sale would probably seem sensible. It would not affect your credit score gravely and will also help to maintain your personal finances. The advantage of bankruptcy would show up only if you had multiple properties that were in non-payment or if you had other monetary issues also.
Warning
Although you could go with either option, these must be your last choice. These dealings will affect your credit in a negative way. It may take ages to restore the harm caused. Thus, before going in for short sale or bankruptcy, you should reach a deal with your lender to alter your current mortgage. Lenders may extend the loan tenure or also bring down the interest rate for you. This would also damage your credit score, however not so severely as the remaining two alternatives. It is important in any financial crisis to obtain good investment advice from a professional with experience in this area.
Living in the state of Michigan where unemployment is leading the country, one of the concerns other than people losing their jobs and unemployment being at 14% is the number of people that are unable to pay their court ordered child support payments. Although unemployment has skyrocketed so has the number of people unable to pay it. So, with high unemployment for months at a time people have chosen bankruptcy as method to off their other debts in order to continue paying child support. The reason for this decision is that once they miss child support payments a warrant is issued and their driver’s license can be suspended. Therefore it makes the situation much worse for both parties.
What happens if I receive child support and I file bankruptcy?
Your payments are exempt and they can not take the money from you. However, if you are over the medium and are required to pay back during a chapter 13 you will still be required to make payments. However, the court can not take more from you that would prevent you from having enough expenses to live on. There are several factors that can protect you and only a Michigan bankruptcy attorney can council you on the appropriate exemptions to use to help save as much income as possible be it from child support or from other means of income.
I pay child support and I am filing bankruptcy do I still have to pay?
There are very few things that the bankruptcy code exempts you from having to pay and child support payments are not one of these. If you are court ordered to pay child support you must continue to pay or you take the chance of going to jail. Other debts that that can not be discharged are debts such as tax liens and student loans. After you figure out how much a bankruptcy attorney costs you can elect to file bankruptcy and he or she will give you the best advice if you are the payor of child support or if you are the recipient of child support payments
Millions of people in America have problems with credit. Many of us will get way over our head with money problems. Once the cycle of debt starts it can seem difficult to break, and for some people it really is. For those that are overwhelmed by debt, they may consider declaring personal bankruptcy in order to wipe the slate clean and get their creditors off their back. Of course, this decision will effect the individual’s credit score and other factors. Declaring bankruptcy is not just an escape route that you can use any time you get in trouble. This decision should only be made after careful thought and consideration.
For those who will need to make a decision about bankruptcy matters, the only question for them is: What types of bankruptcy service exist? The answer to that question is a bit complex. The services vary depending on what type of bankruptcy you are declaring. As an individual, two options are generally available to you: Chapter 7 and Chapter 13. There is one other option that can be used by some individuals, but it is very rare. The other option is Chapter 11 bankruptcy, which is also used by corporations, and thus is only for individuals who have excessive debt.
Bankruptcy is a difficult legal concept for any individual to try to tackle alone. That is why you need to know what types of bankruptcy services exist. The first thing that you are going to need to have when you are going to try declare bankruptcy is a bankruptcy lawyer. A bankruptcy lawyer is going to be able to help you to understand the options available to you, and will help you get your bankruptcy through the court. You are going to need this and many other services in order to get your bankruptcy through and get your financial life back on track.
Again, it is important to remember that bankruptcy is not for just anyone, the repercussions are severe. However, if you are in a situation where you must do this, then make sure that you check into all of your options. If you are unsure if bankruptcy is right for you, give the American Bankruptcy Hotline a call.