When is bankruptcy better than foreclosure?

Foreclosure vs. bankruptcy is two option you have when you’ve defaulted on your loans or fallen behind in payments. Thus, bankruptcy is better than foreclosure when you’re trying to keep your home. Foreclosure is a legal process that either your lender or county starts against you. Typically, the foreclosure is a long process. However, it can result in the lender or county taking your home and selling it at auction to recoup the money you may owe them.

Once your chapter 13 bankruptcy petition is filed, the U.S. Bankruptcy Courts provide you with an automatic stay. The stay halts the foreclosure process at any stage. For instance, if you file bankruptcy after the lender files a foreclosure lawsuit, then the lawsuit is stopped. Let’s say your home has already been foreclosure on. You can still file bankruptcy on the day your home is set for auction. Once you file, the home is taken off the auction list.

Chapter 13 is also a legal process that allows you to repay the money you owe. Even if your mortgage lender won’t accept your back payments, they will have to under your bankruptcy repayment plan. The repayment plan, approved by the U.S. Bankruptcy Courts, last approximately three to five years. Each month you’ll pay a bankruptcy trustee a set amount and your mortgage. Thus, eliminating the need for the foreclosure.

When you’re trying to decide foreclosure vs. bankruptcy, contact a lawyer. The lawyer will determine if you’re eligible for chapter 13 and make sure you complete all the requirements.