Foreclosure stays on your credit report for seven years. A Bankruptcy stays on your credit report for ten years. So if you just look at the length of time this adverse information stays on your credit report, I would say that a bankruptcy is worse.
I would also say that if all three foreclosures happened at or about the same time, then they would all disappear from the credit report at about the same time.
A bankruptcy does not stop a foreclosure – just slows it down. The borrower could offer a deed in lieu of foreclosure, but the lender is not required to accept it. If a lender accepts the deed in lieu, they still may reserve the right to file a deficiency judgement against the borrower if the proceeds from sale of the property is insufficient to satisfy the loan balance.
Perhaps someone from the mortgage lending business will respond and tell us how seriously each affects the loan applicant’s ability to borrow money.
I am studying Lis Pendens lists to learn the foreclosure process in my state and ran across a guy who is going through foreclosure on three different properties, all duplexes or multi units. I have tried to talk with him about options but he said he was declaring bankruptcy.
My question is, if you have multiple properties going into foreclosure, is it better to let each one go back to the bank or just declare bankruptcy (would the BK just wipe out the houses). In this case would one BK hit be less damaging to his future than three foreclosures? What if he deeded in lieu of foreclosure each property?
Thanks for the info
Re: What is worse, a BK or multiple foreclosures? - Posted by Bruce Lawson
Posted by Bruce Lawson on July 02, 2002 at 11:30:00:
Hi Dave,
If the gentleman does not have any equity in his propery’s under bankruptcy the court will not expect them to be included, usually chapter 13 will halt the process of foreclosure. If he was to file chapter 13 befor the foreclosure process started the chances of keeping them would be greater, if they are producing income the court would order him to pay his bills with the money. Chapter 7 bankruptcy will remain non the credit report for seven years, the property’s will each have there own reporting information attached to them therefore he would carry the negative information with him for a while. In this case filing bankruptcy would be better for this guy, two years after discharge with a positive payment schedule he can start over.
You both may be interested to know that bankruptcy’s and foreclosures can be removed from credit reports if they are reported incorrectly by the reporting companies.
Have your guy contact me and will give him details.