Hard times can bring out the best in people, and it can also bring out the worst in people. When you’ve reached a set of hard times, it’s time to see what good it can bring out of you and the world around you. If you’ve finally achieved the ultimate dream that so many people have — owning a home, of course — it can be hard to watch everything fall apart. You’ve been trying in a gorgeous home and trying to take good care of it, only to find yourself in a patch of hard luck with no way out. Some people have talked to you about bankruptcy, but should you even go down that road?
If you’re exhausted all other options and the debts are still piling up, bankruptcy can definitely get you a lot faster than you might expect. You don’t want to just rush into the bankruptcy process. If you’ve got a home, you need to lawyer up immediately. Choosing a great attorney can be hard, especially when you already feel like your resources are pretty tight. But if you want to make sure that you come out of a bankruptcy with as much as you can, getting legal advice is definitely the way to go. Some states do offer legal assistance at a reduced cost, especially if you aren’t making a lot of money.
The best thing that you can do for yourself is to take your time finding legal advice, but then to make a decision. If you’re going to declare bankruptcy, things are going to have to happen very quickly. You can’t just wake up and think that you’ll have plenty of time to declare bankruptcy with so many creditors after you.
What will happen to your house depends on the status of the house. If you are having trouble, the first person that should be advised is your lender. You don’t want to just tell your lender nothing and hope that they won’t notice. This would be something that would get you into a lot worse trouble than you might expect. It’s smarter to actually step back and just tell your lender the honest truth. Even if you are covered by PMI, the lender may still take a loss that they would otherwise like to avoid. If there’s enough equity in your home for it to be sold, then you should definitely take this option. After weighing their own options, your lender will tell you what they’ll allow you to do. Many times a short sale is a lot better than having to declare full foreclosure. Granted, it still doesn’t look all that great on your credit, but it’s better than nothing.
Now, what happens if your home doesn’t have any equity? That’s when the lender just abandons the home and tries to sell it later down the line to someone else. You will have to move out of the home as soon as possible and find somewhere else to be. Finding an apartment or rental property when your credit is bad and you are in the foreclosure process can be hard, but it’s not impossible. Be prepared to give extra security deposits or have to pay one month’s full rent in order to get in the door to a new place. That’s why if you see that there’s going to be no point in holding onto the house that you should definitely let your lender know and try to get some money together to afford your next place. Either way, you will not be able to keep the house and your family will still need somewhere else to be. While there’s a lot of talk about government relief, the reality is that that relief still might be months if not even years away from reaching you — does your family really have that long to wait?
Life after bankruptcy can be hard, but it’s not impossible. The key is that you will need to star tall the way over from scratch. You will need to be honest as well — you might have seen guides that tell you that you can hide a bankruptcy; the truth is that it’s not the case at all. A bankruptcy is actually public knowledge — you will always have people looking at your credit report, and they will find out that you had a bankruptcy. So it’s better to just be honest up front so that you can try to negotiate. If your bankruptcy stems from medical issues, even if they are connected to a caretaker situation, you need to let potential lenders know that. If you have any extenuating circumstances for your bankruptcy, this is something that can even be placed on your credit report. It won’t necessarily always get you better treatment, but at least you get to share your side of the story.
Start with unsecured credit cards that require you to put down a small deposit. These still report to all of the credit bureaus without you having to worry about making ends meet with a standard credit card. These cards also have a lower limit which means that you’re les likely to be tempted. To maximize your new credit building life you really need to make sure that you aren’t going through your entire credit card limit. Try to spend less than 30% of your new credit card’s limit. If you can get someone to sign on with you as a co-signer, you might be able to quality for better terms and even a higher limit.
You will need to wait several years — at least 4-5 — before you will qualify to even think about a home loan again. Lenders are very nervous about people that have already been part of a foreclosure, but that doesn’t mean that they’re not willing to work with you. A good mortgage broker will be able to refer you to lenders that really do work with everyone, including people that are recovering from hard financial times.
In the future, you will want to make sure that you have as much savings as you can so that when things get hard you’re covered, not scrambling — why not start building your recovery plan today?