Question:

benchman10 asks:

I have 2 investment properties, that are now in negative equity and still going down. I have been supporting them for over 2 years now, but getting very close to not being able to pay for them any longer. Have lost a lot of money on these investments.

One of the properties qualifies for a deed in lieu as its been on the market for longer then 3 months, the other, unfortunately has not. I have not been actively trying to sell it as nothing is selling so I did not bother to put in up for sale.

I’m now facing a dilemma, should I deed in lieu the properties, or foreclose or go to bankruptcy court. I still do not entirely understand how my credit is effected in each scenario.

Answers:

Caron answers:

The credit effects of foreclosure, deed-in-lieu and bankruptcy are all damaging no doubt. But yes, there’s a difference in how a deed-in-lieu and foreclosure can affect a borrower.

In general, a deed-in-lieu has less negative impact as compared to foreclosure.

As far as bankruptcy is concerned, it is indeed damaging if it’s chapter 7, a slightly less if it’s chapter 13. This is due to the fact that in the former case, you need not pay anything and get rid of your debts through the sale of your assets. But in chapter 13, you can start paying off apart of your debt and this implies that you are trying to get current on your loans, which is positive and hence your credit score is affected comparatively less than that of in chapter7. However, in general, a bankruptcy lowers your score by 150-200 points.

Evolvik26 answers:

I would say the bankruptcy is the least impact you can have. Once the BK has been started your creditors can no longer report your debt delinquent so you get the hit from bk and thats it (most ppl can rebuild in 2 years) in all other situation your bank wouldnt even concider negotiating till you are 2-3 months behind and then your credit is shot. Add a foreclosure or deed in lieu and you are looking at a 7 yr record and your credit way below radar.


Source:MortgageFit.com

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