Foreclosure and Credit Problems: How To Work Things Out Without Bankruptcy

Many of us have credit problems today due to the downturn in the economy and in the real estate market. I find it very helpful to consult with a bankruptcy lawyer. But that doesn't mean that bankruptcy is a good option. 1. Bankruptcy does not let you get out of secured n loans. Mortgages and car loans are secured loans. If n you file for bankruptcy, it will delayn the foreclosure process, but only for about two months.n Your mortgage company will then continue the foreclosuren process and you could lose your house even though you aren in the bankruptcy process.n n2. Bankruptcy remains on your credit report for ten years. Theren is no way to get it removed. 3. Bankruptcy lowers your FICO credit score by about 150-200n points initially. It is a very bad hit to your creditn and will prevent you from getting decent loans for quite an long time.n n4. Bankruptcy looks bad to prospective business partnersn and some employers. Some people will be reluctant to don business with you for awhile. Jobs involving a highn degree of trust or responsibility come to mind.n nSo those are the disadvantages of bankruptcy. When it comes right down to it, there is no reason to file for bankruptcy unless you absolutely have to. If you are facing expensive litigation, that might be a reason to file for bankruptcy. But credit card debts are the most common reason, and it is not necessary to file for bankruptcy for this reason.nnnNegotiating credit card debts yourselfnnYou can always put together a hardship letter and send it to your credit card companies. You can negotiate a workout agreement with them. The alternative for them is to pursue you and have you file for bankruptcy, so they will often make a deal with you. The deal can include: 1. Working out a reasonable payment plan. 2. No interest on the payment plan. 3. The credit card company will withdraw negative credit n reports on you. They may say they can't do this, but they can.n Negotiating with your mortgage companynnYou can also negotiate with your mortgage company's "loss mitigation" department.nThis can often result in the following advantages:nnn1. You pay off the arrears over six months. 2. You make a good-faith down payment on your arrears. 3. You start making the regular payments again, and yourn mortgage company accepts them.n n4. In some cases, arrears can be added to the originaln loan amount. Interest rates can sometimes be adjusted.n There are many ways to work through credit problems and avoid foreclosurenbesides bankruptcy.nn