What are the pros and cons of filing bankruptcy vs. foreclosure? What is caused by foreclosure after bankruptcy

First, to be clear, you cannot “file foreclosure.”  A foreclosure is a legal action taken by a lendor aganst a mortgage holder who has fallen behind in their mortgage payment (generally more than three months).  One should try to avoid foreclosure – it damages one’s credit, and it complicates one’s ability to obtain future real estate financing.  Additionally, if your lender forecloses on a house and loses money when they sell it or otherwise collect income from it, you can still be pursued for the deficiency unless you  pay it or file bankruptcy.

It would be to your advantage to consult with a qualified local bankruptcy attorney before your mortgagor files a foreclosure action against you.  An experienced bankruptcy attorney could negotiate a re-payment arrangement with your lender that would alleviate the need for a foreclosure action.  If a foreclosure cannot be avoided, your bankruptcy attorney can advise you on all relevant issues in a foreclosure vs. bankruptcy situation, including the long-term ramifications of having a foreclosure in your credit history, and your eligibility for and the critical distinctions between Chapter 7 and Chapter 13 bankruptcy proceedings.  In most cases, you would have to file a Chapter 13 petition to   to keep your house, and would have to abide by a negotiated mortgage repayment plan.

Categorically, filing a Chapter 13 bankruptcy petition stays pending foreclosure actions, but filing a Chapter 7 petition does not.  In addition to your mortgage obligation, your attorney will take into account the extent and nature of your other debts –  after assessing your financial posture, the federal bankruptcy statutes and rules and any applicable state laws, s/he could advise you that a Chapter 7 bankruptcy would be more advantageous for you even though you would ultimately lose your house.  Additionally, your attorney can assist you with repayment negotiations with each of your creditors, debt consolidation, and/or credit counseling.