Foreclosure Myths

moratorium to stop foreclosuresIt has been on the news everyday.  The number of foreclosures occuring each month seems to be consistently the bad finance news of 2008 and leaking into 2009.

Foreclosures are not an end-all for those experiencing this unfortunate situation.  Here are some common myths regarding foreclosure:

  • Bankruptcy is worse than Foreclosure – There are many people that may think that bankruptcy is worse than foreclosure.  Although with a bankruptcy, you can re-establish yourself within 12 months but on the other hand foreclosures will stay on your credit report for 7 long years.
  • Deed in-lieu of Foreclosure – This will only have an effect on your credit report as this is a type of “settlement” on a mortgage.  In most cases, the property is still taken from the borrower, but their credit score is not hurt as much as with a foreclosure.
  • Bankruptcy helps you avoid Foreclosure – Actually that isn’t right – it’s the opposite.  Bankruptcy will not help you avoid the foreclosure process.  If you do file for bankruptcy, the lender will get by with the help of automatic stay.  If the stay is granted, then the lender will attempt to complete the procedure of foreclosure and take the property ASAP.

Don’t give up if you are facing foreclosure.  There is a lot of information out there and banks want nothing more than for you to stay in the home and work out a deal.



Foreclosure