Information and Advice on Foreclosures

Is a voluntary surrender of a home, less damaging to your credit than a foreclosure?

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Bill's Answer: Resident Expert

Due to the recent problems in the housing and credit markets, many homeowners are finding that they owe significantly more on their homes than the properties are now worth. This problem, along with the increase in interest rates many owners are facing, has led to an upsurge in delinquencies and foreclosures which has become the focus of so much attention in the national media. Unfortunately, it sounds like your fiance may be one of those consumers who is suffering the consequences of the downturn in the housing market and, consequently, in the economy as a whole. I would be lying if I told you that there is an easy fix to your financial woes; however, there are several options that you may wish to explore to help improve your situation. offers a wealth of information for consumers struggling to keep their homes out of foreclosure.

A voluntary foreclosure, which is also frequently called a "home surrender" is not very different from a regular foreclosure either from a legal perspective or in how it will affect your fiancés credit rating. When a home is foreclosed upon by a mortgage company, the creditor will usually sell the home at auction, frequently selling the home for much less than the amount the homeowner actually owes on the property. If your fiance allows his home to go into foreclosure, it is likely that the amount received at auction will be much less than what he actually owes on the home, which could leave him responsible for the difference, generally referred to as a "deficiency balance". If he ends up owing a deficiency balance on the property, it is possible that the creditor may file a lawsuit against him to collect on the debt. If the court grants the creditor a judgment against him, the creditor may be able to garnish your fiance’s wages, levy his bank accounts and/or place liens on any other property he may own.  provides for more information about what action creditors in your Michigan can take against you to enforce judgments. Also, if you and your fiance allow the home to go into foreclosure, you can expect the foreclosure to appear on his credit report for seven years from the date it is entered into the public records, likely resulting in significant damage to his credit rating and his ability to obtain new credit.

One option to consider to help relieve the financial strain you and your fiance are facing is filing for bankruptcy protection. If you file for Chapter7 bankruptcy, your fiance may be able to surrender the property to the creditor and discharge any deficiency balance as part of his bankruptcy plan. Filing bankruptcy and surrendering his property will likely have a detrimental effect on his credit rating, but it may be the only feasible option given the financial difficulties you and he have encountered. I strongly encourage you to consult with a qualified bankruptcy attorney to determine the best course of action available to your fiance under the circumstances. If you would like to learn more about bankruptcy, I encourage you to visit the bankruptcy page.

Many Americans are struggling with their mortgages due to the downturn in the housing market and the increased cost of gas and other essentials, so please know that you and your fiance are by no means alone in the difficulties you are facing. I wish you the best of luck in finding a workable solution to this problem.

I hope this information helps you Find. Learn & Save.



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