Talk About Bankruptcy

Many people think that they won’t be able to find a bad credit refinance offer, but this isn’t always true. If you have adequate equity in your home and a stable income,  you can usually do a home refinance – bad credit won’t always prevent you from getting a mortgage refinanced. Depending on the creditor, even car and personal loans can be refinanced.

Many finance companies understand that people want to pay their bills, but sometimes can’t due to circumstances beyond their control. Just a few missed or late payments can negatively affect your credit rating, and it can take years to recover. Before applying for refinancing, pull a copy of your credit report and review each detail. Often, consumers find that there are mistakes on their report. If you find any erroneous data on the report, contact both the credit agency and the reporting company and ask for it to be corrected. If there is supporting documentation, include it with your request.

Once your credit report is correct, go over each remaining negative item and be prepared to explain how each situation happened. Medical problems, job losses and divorces are common problems that cause payments to be delayed and negative reporting to occur, and  the creditor may be more forgiving. If your debt is due to irresponsible spending habits or poor business decisions (such as try to make money with a penny stock tip), you may be facing an uphill struggle.

The most important thing to the finance company will be that the issue is corrected and that you are current on all existing obligations. If you have always paid your rent or utilities on time, you will often be able to get a letter or recommendation stating those facts from your landlord or utility company. This information is rarely reported to credit agencies.

Use your current work record and pay stubs to prove to the financing company that you are gainfully employed and have an adequate source of income to pay your current bills as well as the refinanced loans. The finance company may also want to see your recent bank statements to determine if you have a savings safety net in case a new emergency comes up. While they may not require it, most experts recommend that the typical family maintains a six month cash reserve.

If you can satisfy all of these requirements, you are well on your way to finding a bad credit refinancing solution.This could be a great way to lower your interest rate or preventing a loan from going into a default status. Before accepting a loan, shop around to find the best terms.

A deficiency judgment is something that looms over the head of everyone who has to take a loss on their house, whether by foreclosure or by short sale. This isn’t the law in every state, but in many areas the mortgage lender is allowed to sue for the unpaid debt after the sale of the home – and when they can, they usually will.

When you have to sell your home through foreclosure or short sale, is there any way to prevent a deficiency judgment from being awarded? What happens in those situations?

Most of the time, the only way you can avoid a deficiency judgment is by negotiating with the lender during the pre-foreclosure process. They know how expensive it is to maintain their REO properties. The lender may consent to waive their right to collect the rest of the debt if they see that it will cost them less money in the long run to allow a short sale and simply let the debt go.

When that isn’t possible, depending on state law, the homeowner may have a deficiency judgment on their hands, whether the short sale was approved or the foreclosure went through. At that point, the debt only goes away through payoff or bankruptcy.

How is a deficiency judgment figured? First, the judge will look at the proceeds from the sale of the home. If there was a short sale, the amount of the deficiency judgment is the mortgage debt less the sale proceeds. If the home went to auction, in most states, the judge will take the greater of the appraised value of that home or the highest bid from the auction and subtract that amount from the mortgage debt.

So, the former homeowner now has a court order which says he has to pay the rest of that mortgage debt to the bank. If there were two or more mortgages or liens, that homeowner may even have two or more deficiency judgments against him.

Immediately after the judge signs the order, the deficiency judgment begins earning interest. If the lender adds its REO expenses to the balance, the interest just keeps climbing higher. There is an interest rate of 11 percent per year on deficiency judgments in Florida. What’s the rate in your state?

Next, the lender usually sells these types of debt to collection companies for 5 to 10 percent of the amount due. Since they know their chances of collecting the debt from a financially drained homeowner are slim to none, lenders would rather get the debt off their books and get what they can out of it.

Besides the deficiency judgment, the former homeowner also has a wounded credit report and a lower FICO score. Having a foreclosure on record is one thing, but a deficiency judgment or a low FICO score could influence a critical decision by others on whether to give that person a job, a loan, or a rental home.

The foreclosure scenario is changing. There are more property foreclosures than ever right now, and that means deficiency judgments could be increasing as well. The government is taking the lead in re-evaluating how foreclosures are handled. We may see some changes in the way deficiency judgments are handled in the near future, and we may not.

For now, your best strategy is to try and get the lender to see the wisdom of forgiving the debt and reporting the mortgage as “paid in full as agreed” on your credit report. Negotiating that deficiency judgment away is the key to survival here, because it can hang over your head for a long time.

Need to learn more about foreclosures? Visit the Strategic Real Estate Coach website. You’ll gain access to weekly updates on current events in the mortgage industry and more!

Before you go about looking for a loan for anything, most commonly a home or a car, you have to know what your credit report looks like. A few small glitches might not cost you much, but anything more is going to hurt you when you are given an interest rate. Sometimes, your credit will ensure you are turned down for a loan no matter where you go. If you find that you have credit that needs help, you should think about doing some credit repair before you sign up for any type of loan. You will save a lot of money in the long run if you do.

If you have a bunch of small debts that you can pay off on your own, you can do your own credit repair. However, you have to make sure those things are removed from your credit report in a timely manner or are at the very least marked at paid. The late payment might still hurt you, but not as much as not having paid it at all. If you have debts you cannot handle, however, you may want to find someone for professional credit repair. While searching for someone, skip anyone who says they can repair your credit without you paying a dime. It’s not possible.

There are a few different types of credit repair you can try, and what is recommended to you will probably depend on your debt and other factors. Some will recommend that you can pay off many of your debts by paying a little to each place each month. These folks may negotiate for lower payment amounts, and then you give them the money to make your payments. In other cases, you may get a loan to cover all of your past debt, and then you make a payment each month to pay that off. These types of credit repair work because your creditors will do anything to avoid the chance that you might file bankruptcy. If you do that, they will probably get nothing, and they know that.

Along with those programs for credit repair, you should also consider going through consumer credit counseling. This will not necessarily restore your current credit, but it will help you avoid the very problems that put you into debt in the first place. These organizations will help you live within your means, stick to your budget, and avoid borrowing more than you can comfortably pay off in a reasonable amount of time. Most who go through credit repair – but skip the counseling – end up right back in debt just five or so years down the road, so this is a great idea for anyone.