An unfortunate sign of the times is that many people who face foreclosure are contemplating whether to file for bankruptcy protection as a stop-gap measure to give them more time before losing their home.

My first piece of advice to people who face this quandry:  Hang in there.  I faced it many years ago myself, and thankfully we have recovered nicely, though it did take some time.

My second piece of advice:  If your only justification for filing for bankruptcy protection is to delay your foreclosure proceeding, don’t do it.  This is only my (non-professional) opinion, but here’s why I believe this:

1.  A bankruptcy on top of a foreclosure is more damaging to your credit than a foreclosure alone. The more negative items on your credit report, the lower your score.  And remember:  Just filing for bankruptcy does not automatically mean that your creditors cease to [negatively] update your credit history.  Getting a foreclosure means only that you have a foreclosure on your credit history.  Filing for bankruptcy means you’ll have the bankruptcy AND foreclosure on your credit history.

2.  If a foreclosure is the only financial obligation for which you’re delinquent, bankruptcy is unlikely to be helpful. Generally speaking, bankruptcy is worth considering when there is a mountain of unsecured debt spread among many creditors.  (Yes, there are exceptions.)  But if your only debt is a property that is nearing foreclosure, it will be worth considering the relinquishment of your property and the associated release of some or all of your mortgage debt.

3.  Bankruptcy is not a good stall tactic. Generally speaking, you’re going to get no more than a couple of months of stalling as a result of filing for bankruptcy if you’re not a legitimate candidate for bankruptcy.  And the net effect will be that you have a bankruptcy filing on your credit history for an entire decade in exchange for an extra month or two (at most) of living in your current home.

Allow me to reiterate that I do understand the pain that this type of circumstance brings.  The good news is that because foreclosure is so rampant right now, landlords are frequently being a bit more flexible in terms of their qualification criteria.  Particularly if you have never had financial trouble prior to the current economic weakness, you could make a good case why you are a good risk despite the foreclosure circumstance you’re now facing.

Additionally, there are MANY properties that are good candidates for creative acquisition through subject-to, land contract or lease options.  If you need a place to live and don’t have the credit to support a traditional mortgage, a creative solution like those listed above may be a good way to fill your needs.  (Let me know in the comments area below if you’d like more information on how to find and implement these types of transactions… the home I live in right now was purchased via Subject-To.)

Once again, hang in there.  It’s a tough time for many people right now, but your silver lining will come.

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Interested in buying, selling, leasing, flipping or optioning a piece of real estate? You may be tempted to think that the internet has nothing to do with this, but you’d be wrong. Here’s why:

Let’s imagine you’re interested in buying a pre-foreclosure property. What might a person in that situation do if they happen to be using the internet? Some things that come to mind for me are:

• Search for terms like “stop foreclosure”, “file for bankruptcy”, “foreclosure information”, etc.
• Visit websites offering “payday loans” or other types of short-term financing
• Search for local real estate agents, apartment communities and property managers (since they will soon have to move to a new property)

As an example, go ahead and type in any of those types of terms in this Google search box and see what happens:

What happens is this: Somebody else is getting the attention of the pre-foreclosure victims that you are in need of. Somebody else will make contact with that person before you do - in fact, you’ll probably never even have a shot at talking to that person. Why?

Internet marketing. Somebody else had the foresight to know that many, many, many pre-foreclosure victims will use the internet as a resource to avoid foreclosure, or to find a bankruptcy attorney, or to find a new place to live. And whoever that sombody else happens to be, they are getting high-quality leads and investment opportunities exclusively as a result of internet marketing.

Do you use internet marketing in your real estate investing business? I do, and have taught thousands of others how to do it as well. But I’d love to hear from you right now: How do you use the internet in your real estate investing business? What would you like to learn more about?