Facing a bankruptcy, mortgage foreclosure, or other similar issue as a homeowner can be quite overwhelming. But when a homeowner is unable to pay their mortgage, these options are often times unavoidable. As soon as a lender has determined a default on the homeowner's part, they can issue the required notice and begin taking ownership of their house, a process known as foreclosure. By legal right, the lender can then sell the home to fulfill the homeowner's unpaid bills. During this process, the homeowner will not only lose their home, they will also experience damage on their credit reports.

Alternatively, bankruptcies can be used to postpone foreclosure before it continues. Bankruptcy, whether Chapter 7 or Chapter 13, will force the lender to hold off on foreclosure according to the terms of the bankruptcy. A Chapter 13 bankruptcy, for example, creates a 3 - 5 year repayment plan that accounts for all unpaid debts up to the date of bankruptcy. If followed accordingly, the bankruptcy will delay foreclosure and can possibly save the endangered property, but it will still negatively affect the homeowner's credit report.