It isn’t as hard as you think to fall behind on your mortgage payments. The loss of a job can put you behind in an instant. You can also just as easily fall victim to an illness or injury that your insurance company refuses to pay out the full amount of coverage on. Not every person – in fact, hardly any person – that falls behind on their mortgage should be looked at as a deadbeat or financial delinquent. Falling behind on your mortgage payments exposes you to a world of headaches, financial and otherwise. If you fall too far, you may be subjected to a series of penalties, including foreclosure.

How Are Foreclosure and Bankruptcy Related?

You may be wondering what your alternatives are if you are warned by your mortgage holder that the foreclosing process is about to begin. As it turns out, there are several that you may consider as a way forward from your present unfortunate situation. In some rare cases, you may be able to come to a compromise solution with the holder of your mortgage. For example, they may agree to a short sale of the property or a modification of the original loan. However, in most cases, they will not be so agreeable.

What you should realize is that it takes time for the foreclosing process to begin. You will normally have two or three months to make back payments before the holder of the mortgage makes up their mind to act against you. During this time, if you cannot make the payments, you can still suggest other alternatives. These may range from an extension on the mortgage to a deed in lieu of foreclosure. If all else fails, you can close the link between foreclosure and bankruptcy by applying for Chapter 13 protection.

You Can Use a Chapter 13 Bankruptcy to Save Your Home

There are certain advantages which you will be entitled to have recourse to if you decide to file for Chapter 13 bankruptcy protection. For example, one of the chief protections afforded by Chapter 13 bankruptcy is the scope that it gives you to set up a schedule for paying off the debt that has accumulated due to defaulting on your mortgage. In most cases, you will even be allowed to propose the exact length of time that you will take for making these repayments. As long as you can commit to such a schedule and manage to observe it to the letter, you will be allowed to keep your property.

Chapter 13 Bankruptcy Can Help Eliminate Second and Third Mortgage Payments

Filing for bankruptcy under Chapter 13 conditions can also help you to phase payments that are due on a second or third mortgage. This type of protection typically allows a bankruptcy court to consider second or third mortgages as a form of unsecured debt. What this means for you is that unsecured debt is a matter of very low priority and will usually not have to be paid back. However, this will only be the case if the first mortgage on your home contains the whole of your property value. If this is so, then the second or third mortgages will have no further value to be secured or collected.

Bankruptcy May Be Your Best Choice to Save Your Home and Your Credit

You should be aware that filing for bankruptcy will certainly have some adverse effects on your credit. However, the damage will not be anywhere near as severe or long lasting as the negative effect that follows after having your home foreclosed on. Not only will being foreclosed on have a ruinous effect on your credit, but you may also still be saddled with the leftover debt.

Bankruptcy May Carry More Advantages Than Disadvantages

Even if filing for bankruptcy doesn’t save your home, you are probably better off having done so. You may no longer have your home, but you will at least be free of mortgage debts and tax liability. You’ll have a huge monkey off your back and will be able to plan for your future. This would not be the case if you simply allow yourself to be foreclosed on without trying to fight the process.

In addition to being in debt, being foreclosed on may mean you may never be able to even consider buying a home in the future. Most mortgage companies will not even consider you a candidate for a new loan if you have been foreclosed upon in the past. Bankruptcy, although it also carries its fair share of disadvantages, will at least allow you to start again with a clean slate. If you are faced with a choice between being foreclosed on or filing for bankruptcy, it may be wise to choose the latter course of action.