Which Is Worse Foreclosure or Bankruptcy

Some people, when faced with the choice between foreclosure and bankruptcy, are not sure which is the right one to choose. Few people realize how difficult the choice is to make, or recognize that the decision is not an either/or one.

Paying the lender is the only true way this action can be prevented. A mortgage loan is sort of like a car loan and if a person does not pay his car payment, he will lose the car through repossession. In a similar vein, if a person is lax in their monthly mortgage payments, they will experience losing their home via foreclosure.

For people who cannot pay their debts, sometimes they file the legal action of bankruptcy. This will put an end to the civil actions being filed against the debtor during the time they are in bankruptcy. This means that the mortgage lender cannot continue through with their legal actions, including a foreclosure.

Once they are granted such relief, they will continue with their legal actions against the home buyer. Bankruptcy does not allow you to keep a home that is not paid for to the mortgage lender, and it will not stop foreclosure. Bankruptcy will slow the action, but it will not prevent it.

While bankruptcy doesn’t stop foreclosure, it can give a person extra time to pay the lender, or make it easier to do so. Mortgage lenders are required to stop their foreclosure due to bankruptcy, and this gives the person owing money additional time to raise money to pay the lender. Through bankruptcy, many unsecured debts are eliminated completely, and a person who is in debt will frequently find that they have money to pay their mortgage payments with that they didn’t before bankruptcy. Also, a chapter 13 bankruptcy is a court ordered payment plan and allows a debtor to pay the mortgage catch up amount over a period of time.

In order to file for bankruptcy, you must first qualify - which not everyone does - and even if you do, you will be faced with large legal fees. Legal bills can be quite high, and high enough that they outweigh the costs of catching up with the mortgage. If you think that bankruptcy may help you stop or avoid foreclosure, talk with a licensed lawyer. No one should attempt a complicated legal process like bankruptcy without legal aide. This article is only intended to give general information, so for more detailed information, contact a lawyer in your state.