How can a Deed in Lieu of Foreclosure Create Debt Relief?

A Deed in Lieu of Foreclosure is an option for some homeowners who have fallen behind on their mortgage payments. In essence, this option will cancel the loan on the home for the home buyer, as he or she will give the deed (ownership) of the home back to the lender. It's different from a foreclosure because it's a straight-up deal -- an effort to avoid foreclosure is beneficial to the consumer and the lender because they both get something out of it -- the consumer gives up his home to avoid foreclosure, the lender accepts the deal to avoid losing profits on a property.

In most instances a deed in lieu of foreclosure is easier on consumer credit history and has a distinguished advantage above short sale in that the homeowner is not the responsible party for finding a new home buyer.

While it may not be easy to just walk away from an investment, it may be easier to walk away than enter a short sale, which is very damaging to credit history, or accepting foreclosure, which is also harms credit substantially.

If you can successfully offer your lender a deed in lieu of foreclosure, you'll have to walk away from your property completely, but it will in many instances be your best choice. You may still have to file for bankruptcy in certain circumstances, for example, if the home was what you used to collateralize debt with another lender, or if you are still left behind on other payments on car loans or credits cards.

It might be up to you to prove to your lender that the deed in lieu of foreclosure is good for them too -- they're not in the habit these days of wanting to hang on to more real property, but by the same token, they're not big on paying for all of the paperwork and rigmarole of foreclosure either.

If you think this is a viable option for you, discuss it with your bankruptcy attorney first to be sure there are not other choices that won't work better for you.

Is Bankruptcy Harder on My Credit Score than Foreclosure?

This is a great question that many clients I have ask when considering filing for bankruptcy in Portland or Vancouver.

The truth of the matter is that it depends, but oftentimes, people fear bankruptcy because they think it will be the worst of "two evils." It can often be the case that bankruptcy is easier on your credit score than a foreclosure.

To be 100% truthful, whether you opt for bankruptcy or foreclosure, there will be a negative impact on your credit. That said, foreclosure does damage without providing any positive results, namely, helping to restore your credit as a Chapter 7 or Chapter 13 bankruptcy will. In addition, a foreclosure does not wipe debt you owe to creditors and typically has a longer lasting negative impact on your credit score. As if that weren't enough, having a foreclosure on a property on your credit history will make it a great deal harder for you to purchase a new home in the future.

When you file for bankruptcy it will start your credit history from the ground up and allow you (in most instances) to have a fresh start for your financial health. In some cases, people who file for bankruptcy can bounce back within 24 months or so, as they make a strong effort to stay on top of bills and apply for any credit lines they can -- ensuring, of course, that they make their payments on time, even if it's with a secured credit card.

Regardless of what the general "rules" are, you need to consult with a bankruptcy attorney to know whether bankruptcy is the right choice for your financial future.

Foreclosure Defense and Filing Bankruptcy in Vancouver

Bankruptcy Attorney Thomas McAvity has helped many people face bankruptcy in Washington, and for many of these people the main focus has been foreclosure defense. Why? Because most of the millions upon millions of bankruptcies being filed are the result of home foreclosures caused by sub-prime and ARM mortgages.

Using Chapter 13 bankruptcy to protect yourself from predatory lenders will allow you to move on financially. If you qualify for Chapter 13 you will be offered debt reorganization and you will be assigned a trustee from the bankruptcy court. This trustee will handle all of your debt in a consolidated manner, and you will only need to make one payment which will cover all of the debt you owe to your mortgage company and any other creditors that you owe. Scheduling a free consultation with attorney Thomas McAvity can help you and your Washington bankruptcy attorney figure out which form of bankruptcy best suits your unique needs.

If you are interested in Chapter 13 bankruptcy and think you may qualify, call Thomas McAvity and the Northwest Debt Relief Law Firm today by dialing 1-866-601-1918.