how bankruptcy affects your credit

[mage lang="en|de|en" source="flickr"]how bankruptcy affects your credit[/mage]
How will forclosure affect your credit cards and interest rates?

I bought a house about 7 months ago as an investment. It turned out to be a mis-calculated step, and currently, i am really struggling to make my payments, along with my credit cards and student loan bills.
My questions are as follows:
1- What will happen to my credit cards and interest rates once the house goes to foreclosure? Will i still have them, will my interest rates go up?
2- Can i file for bankruptcy although i am never late on a payment? Neither my credit cards or my other bills? I am at a point where my monthly bills exceed my income by about 500 dollars, not including gas, insurance, energy and most important my daily expenses. These are all charged on my credit card for lack of funds.
Please advise!!!

Forclosure is just as bad as bankruptcy (if not worse). Say you let it be forclosed, once the bank sells it they will come after you for any deficiancy balance you owe…so you will still owe them money, and you will have this forclosure on yor credit.

There are other options than forclosure…there is a “deed in lieu” where you give the house back to the bank, there is a short sale (bank must approve both options) where you sell the house for less than the mortgage (some banks send you a 1099 saying the deficiancy is income others make you sign a note and pay it back as unsecured debt)…check out this website to see your options in more debth: http://www.hud.gov/foreclosure/index.cfm

It may or may not affect your credit card interest rates. There is a universal debt clause on about 60% of credit cards that says if you default on one form of credit they can raise your interest rate on their card as well…even if you never have had a missed payment.

You should consult a bankruptcy attorney about your options if you are going to go into forclosure. You need to be aware there is a formula the attorney will use to calculate whether you qualify to file at all and if you do what chapter you qualify to file (7 or 13). You would not be able to keep your credit cards, and you could let your investment property go back to the bank if you choose. With chapter 7 they sometimes require a repayment plan, but it isn’t that much…much less that what you owe now.

I am a firm believer that if you have more money going out than coming in it is a good idea to start thinking about bankruptcy!

Why Bankruptcy & Foreclosure Affects Your Credit Less Than You Think