Foreclosure vs. Bankruptcy

by admin on September 13, 2010

Question:

Explain the difference between foreclosure and bankruptcy.

Answer:

Bankruptcy is a legal process wherein people who cannot make their payments can get a fresh financial start. Every person has the right to file for brankruptcy, as stated in the federal law. All bankruptcy cases are handled by the federal court. When a person files for a bankruptcy, the creditors who are seeking debt payment from you will immdieately be stopped from doing so. When a borrower or homeowner is not able to make his house payments and is unable to catch up, a foreclosure of the home may occur. This is a process wherein the lender regains the home or property which they have financed.

When the home or property is foreclosed on, the current homeowner is evicted from the property. Therefore, the homeowner loses possession of the property and risk the possible equity that he or she has in the home. As stated above, when a person files for bankruptcy, all creditors trying to seek money from the homeowner is stopped. Therefore, filing for bankruptcy can stop the foreclosure process from taking place.

Depending on the state the home resides in, the foreclosure process takes for a certain length of time. It usually proceeds for a duration of 90 to 100 days for uncontested foreclosure cases. However, if there are disputes regarding the request for foreclosure, the process may take a longer time. If you want to know the details of the foreclosure process in your state, contact a real estate attorney. Both bankruptcy and foreclosure cases will appear in your credit for a period of ten years.

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