What are the credit implications of foreclosure and for how long?

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We live in Hawaii and our mortgage has become unmanageable. We just found out our house is worth 64k less than we owe. We have good credit though are overextended because of mortgage. No defaults and one 30 day late pay. We want to sell but do not have the credit left to get a 64k loan to pay off the rest of the loan. We desperately do not want to go into foreclosure. Any options anyone is aware of?

Personal Loans of $ 65K. Credit Card Loans of $ 40K. Car Loan. Student Loan. Very little in assets left, home foreclosed last month, Sept 2008, and sold another property in Dec 2007 (to get rid of the mortgage payment that was killing me).

Needless to say that I was making great money at one time, but at the moment I’m unemployed and have been for 7 months now. When I do work, I can make a lot of money per month $ 9K/month. But for the past two years, I have been taken advantage of and I believe I now fall into a category that neither can claim Chapter 7, due to making too much money when I can find work, nor Chapter 13 due to not being employed at the moment. I literally have a couple hundred dollars left to my name, which wont even cover my car loan this month…let alone the food, auto loan, electric, etc.

Any thoughts, options? I’m in Hawaii, Hilo to be exact.

7 Comments
  1. Reply
    mazziatplay
    February 23, 2011 at 8:13 am

    Foreclosure has a major negative impact on your credit history that will impact you for 10 years or more and imapir your ability to obtain other financing including mortgage financing for a number of years.

    Call your lender and ask them about a “short sale”. They may forgive the balance after the sale in order to avoid the time and expense of a foreclosure.

  2. Reply
    peter j
    February 23, 2011 at 8:24 am
  3. Reply
    justice 4 all
    February 23, 2011 at 9:18 am

    The problem is that 64k amount of negative equity you still owe even after being sold. I would contact the bank to see what can be done. Leasing the house to someone may be an option but you would have to be able to get the monthly note you now owe. Worse case scenario is you lose this house 7 to 10 years this will haunt your credit. Getting another house or an apartment is very difficult after a foreclosure. Try to work something out before that happens. But do not stop corresponding with the mortgage company. You will fair better when you keep the lines of communication open with them, or so I I’ve been told.

  4. Reply
    Pengy
    February 23, 2011 at 9:22 am

    Speak with your mortgage company they may let you pay interest only for 6 months or so to see if your situation improves. Worth a shot

  5. Reply
    Prickle's Back!
    February 23, 2011 at 10:20 am

    Please contact your lender to discuss this issue. Do it before your property forecloses. If you don’t already belong, join a credit union, their home loan dept. may have some innovative ideas. Whatever the case, please contact your lender ASAP. There are all kinds of creative refinancing ideas out there. Explore all of your options. Besides talking to your lender, check around.

    Read this article:

    The Impact of Short Sales / Foreclosures on Credit Reports
    Sellers may wonder whether a letting a property go into foreclosure would be easier and smarter than going through a short sale. With a foreclosure, and depending on state laws regarding foreclosure, a seller could stay in the property, essentially rent free, for four months to a year before being forced to evacuate. But that fact alone does not mean a foreclosure is better.

    Whereas a short sale involves offering the home for sale, generally listed through MLS. Potential home buyers will make appointments to view the home, some will make lowball offers, agents might hold open houses and, in general, a seller’s life will be disrupted, all in the hopes that a buyer will buy the home.

    Basics of a Short Sale

    Short sales happen when a lender agrees to accept less than the amount owed against the home because there is not enough equity to sell and pay all costs of sale.
    Continued at http://homebuying.about.com/od/4closureshortsales/qt/060907SScredit.htm

  6. Reply
    Shaka Wahine
    February 23, 2011 at 11:14 am

    aloha, i live in kona, howdy neighbor !

    i watch the suze orman show on tv, she’s a excellent financial advisor.
    you can call in with your questions and get the answer you need or you could check out her web site and possibly find out answers too.
    i’d be guessing so i don’t want to blab about what i don’t know as fact in your case, so give her a try.
    she is awesome !

    http://www.suzeorman.com/

  7. Reply
    Michael
    February 23, 2011 at 7:28 pm

    The answer is .. nobody knows. We know how foreclosures are currently handled by the credit bureaus, and we also know the credit bureaus own credibility is shot or they would have predicted all the foreclosures. The laws are in a state of flux and it isn’t clear what will happen over the long run. In the immediate term yes .. your credit will take a hit. We just don’t know in the long run.

    I’d advise speaking to an experienced, reputable foreclosure defense lawyer in your state. That is, a licensed lawyer who handles foreclosures — not bankruptcies, or foreclosures and a bunch of other work — and see what they have to say. Even interview a couple of them; there are some really good one’s by now. Laws vary state-by-state, and with different fact into within states, so don’t trust ‘net advice.

    Be extremely wary of talking to your bank; do some research. The evidence is pretty clear that they lie (remember, they get paid to try to work something out, and paid more to foreclose on you). Never take advice from of pay a non-lawyer no matter what they tell you. Some, like forensic auditors, can be legitimate but the legit one’s only work through lawyers; if one is needed a lawyer will refer you to them.

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