Monthly Archives: September 2009

What is a short sale?

If you sell your house in less than the amount that you owe to your lender then it is called a short sale. Short sale is one of the most effective ways to avoid foreclosure. In that case the lender has to agree or give you his consent before you sell the property. So when you face problem to make your monthly mortgage payments and if it seems it is almost impossible for you to make these payment and short sale is the only way that you can save your credit or avoid foreclosure then contact your lender as soon as possible.

If the lender finds that you are really in trouble then he may be grant you for the short sale. The plus points of short sale are that in most cases the lender does not come after you for the deficiency judgment. Short sale does not even affect your credit report much. It will drop your credit score by 120 to 150 points and you may be even able to get a new mortgage after eighteen months if you can make payments to all your other monthly bills.

If your lender forgives the deficiency amount that you owe to the lender even after the short sale. Then you may have tom pay tax to the IRS as that amount will be considered as your income and it will be also be recorded in your credit report. To know how much Tax you need to pay, you can contact any Tax Official in your County.

Types of bankruptcy

Bankruptcy is a relief process given to the insolvent debtors. There are mainly 4 types of bankruptcy and they are……
1.    Chapter 7
2.    Chapter 11
3.    Chapter 12
4.    chapter 13

Chapter 7: Chapter 7 bankruptcy is liquidation bankruptcy. That means if you file chapter 7 bankruptcy then all your non exempt properties will be sold to pay off your debts. This affects your credit score a lot. Your credit score may be dropped by 250 to 300 points and you may not be able to get a loan in coming 5 to 7 years after the bankruptcy chapter 7.

Chapter 11: The process of chapter 11 is a very complex and this type of bankruptcy is filed by the troublesome businesses or Corporations. Though individuals can also seek to file chapter 11 bankruptcy, most people files chapter7 or chapter13 bankruptcy.

Chapter 12: This type of bankruptcy is for farm owners. They can retain the ownership of their property and work out a repayment plan prescribed by the court.

Chapter 13: Chapter13 is most common form of bankruptcy. Under chapter13 bankruptcy you can work out a repayment plan through which you will be able to pay your debts to your creditors. Chapter13 bankruptcy does not affect you credit report much. It will drop your credit score by 120 to 250 points.

The best thing of bankruptcy is the creditor cannot harass you once you have file for bankruptcy. You cannot file bankruptcy on your own. There are certain eligibility criteria that you need to pass to file bankruptcy. The most important thing is that before filling bankruptcy you should consult with an experience attorney.