Knowing that you’re facing foreclosure is stressful. You may not be sure where you’re going to live or what’s going to happen if you don’t try to stop the foreclosure.
Sometimes, the truth is that it’s better to allow a foreclosure to happen than to try to stop it. While a bankruptcy could help you get back on track financially if you’d like to stop the foreclosure, there are times when a foreclosure isn’t a bad option.
Upside-down loans and foreclosure
In cases where you’re upside-down on a loan based on the current value of your home, it may make sense to allow the foreclosure to continue. For example, if you purchased your home and took out a loan for $300,000 but the home is now only worth $150,000 because of changes in the market, it may not seem realistic to pay the extra $150,000 on top, since the home is no longer that valuable.
Limited results with bankruptcy
Another time when you may want to consider allowing the foreclosure to continue is if you think there will be minimal benefits even if you complete a bankruptcy. If you cannot afford your home and won’t be able to pay the loan, then walking away from the purchase is not always a bad idea. There are options like short sales or deeds in lieu of foreclosure to consider, but you will likely have a good idea of what you can afford and if any of these possibilities will do enough to help. If not, then foreclosure is the one way you can guarantee that the home will no longer be your responsibility.
For most people, there is a desire to stay in their homes. However, if you are in a position where you don’t want your home, can’t afford to pay for it and can’t make enough by selling it to repay the debt, then a foreclosure or other options may be right for you. Before you decide to go into foreclosure, remember to learn more about the legal options that may help you minimize the damage to your credit.