Facing foreclosure on your home can be a scary event to go through, especially if you really want to avoid losing your home. There are several things you can do to try to stop the foreclosure, and the main two options you have are using a loan modification or bankruptcy. Trying a loan modification might be the best route to take if you meet the following conditions:
You have great credit
Bankruptcy will harm your credit a lot, and it will remain on your credit report for 7 to 10 years, depending on the branch you choose. Because of this, a lot of people will try to avoid using bankruptcy unless it is absolutely necessary. A loan modification is a program you can use with your lender to change the terms of the loan. If your lender will agree to this, it will not affect your credit.
One thing to keep in mind is that it might be wise to check your credit score before you make a decision about this. If you are facing foreclosure, it is probably because you are several payments behind on your loan. If this is the case, your credit is probably not the best right now. While a loan modification might not harm your credit, your payment history will, and filing for bankruptcy might not be a bad option to choose.
You want to stay out of court
Bankruptcy will require going to court, whereas a loan modification will not. Using a loan modification is not easy, though. These programs take time, and they require gathering and submitting a lot of paperwork. You will need to prove you need help from your lender, and you will have to write a letter of hardship describing why you have fallen behind on your payments. It will be up to your lender to determine whether they will agree to this or not.
While you will not go to court with a loan modification, the benefit of bankruptcy is that you will most likely have no problem qualifying for it. There are requirements you must meet to be eligible to file, but most people have no problems meeting these.
A loan modification and bankruptcy are the two best options you have for stopping a foreclosure, and both methods will allow you to keep your home. If your lender will not agree to a loan modification, you may want to talk to a bankruptcy attorney for help.
