If debts are allowed to pile up and they assume a proportion that is beyond repair, bankruptcy or foreclosure is inevitable for debtors. You will have to face foreclosure in case you have fallen behind on payments and you have several missed payments to your credit. Under such circumstances foreclosure is inevitable.
Bankruptcy can only delay the foreclosure process
When you file bankruptcy, you declare your inability to make payments for your debts. However, there is one advantage if you file bankruptcy and that is automatic stay. Automatic stay will delay the foreclosure process. However, in case the lender files for relief from the automatic stay, the foreclosure process can proceed. So, you can stop a foreclosure only if you are able to pay back your dues to the lender. If you are unable to make the mortgage payments, you have to be prepared to lose your home through foreclosure.
If you file bankruptcy and you are on the verge of facing foreclosure, your lender will have to suspend all legal actions against you. However, as mentioned above, if your lender files for relief from automatic stay, he can proceed with the same. So, filing for bankruptcy will not allow you to retain your home unless you make your mortgage payments.
Bankruptcy gives you more time to make mortgage payments
Since filing bankruptcy gives more time to make mortgage payments, you can catch up with your payments if the dues are not astronomical. And if you happen to file Chapter 13 bankruptcy, you get a repayment plan that allows you to make payments in a systematic and organized manner. So, you get another opportunity to pay off your mortgage. When you file bankruptcy, it can discharge some of the unsecured debts. So, if you have some cash at your disposal, you can make payment for your mortgage.
You can delay foreclosure only if you are eligible for filing bankruptcy. However, as per the new federal bankruptcy laws that were implemented in October 2005, you will be allowed to file bankruptcy only if you qualify. Earlier, it was easier for a debtor to file bankruptcy. Under such circumstances you will have to fore go your home.
How is your credit score related to foreclosure and bankruptcy?
Whether you file bankruptcy or face foreclosure, either way your credit score gets affected. If you file bankruptcy, it will remain in your credit report for a period of 7 to 10 years. Similarly, if you face foreclosure, the same gets recorded for a period of 7 years.