There has been a recent question as to when the fact of foreclosure hits a credit report. The question arose in the context of doing a short sale, after a bankruptcy, to avoid the blemish of a foreclosure as well as a bankruptcy. After research, exploration and after speaking with the credit bureaus, I submit the following:
A mortgage company may report the fact that your loan is in foreclosure once the foreclosure process is commenced. The thought that the foreclosure would not reach the credit report until the finalization of the process is inaccurate. In several of my recent bankruptcy case filings, I check the credit report of my clients before and after they lost the home to foreclosure. In each case, the fact that the homeowner was in foreclosure was made aware to the credit bureaus long before the foreclosure was completed. Thus, commencing a short sale after the foreclosure process has started may not prevent the foreclosure from appearing on a credit report.
In summary, if you are filing for Chapter 7 bankruptcy and intend on surrendering your home, there is no benefit to doing a short sale. It is far better to remain in your home for as long as possible while saving money and preparing for your eventual move.
For further information regarding foreclosure, short sales and bankruptcy, feel free to contact me directly at (818) 714-2200 or visit our website.