Expert: Terry Leeders - 4/26/2008

Question
Hello.  First off, I want to thank you in advance for your answer.  You are very helpful and I have learned a lot from your answers to other peoples questions!
We recently converted our Chapter 13 to a  Chapter 7 bankruptcy.  We are in an ARM mortgage, and our mortgage company refuses to work with us, so after a long and very hard year (this is how long we have been trying to modify our mortgage) we have decided to surrender our home.  
Here is my question:  when surrendering the home in bankruptcy does it count on your credit report as included in bankruptcy or will it also count as a foreclosure, thus being a double negative on our credit report(s)?  I have asked on several message boards but it seems that no one really knows.  Thanks so much!


Answer
In my experience, future creditors will see that the bankruptcy discharged the debt thru the case.  But, you are correct that the foreclosure will be on your credit report too, as that is the process that the lender takes to transfer title back.  You may want to consider a deed in lieu of foreclosure, so that there wouldn't be a foreclosure case # on your credit.  A future mortgage lender will see the foreclosure otherwise, even though the bankruptcy trumped it.  Each creditor in the future has their own issues with items on credit reports, but clients are able to get mortgages again though.