Alternatives to Bankruptcy
Bankruptcy is not the only way to stop foreclosure, and for many homeowners it is not the most advisable either. Lenders usually lose money when they pursue foreclosure, so in many instances they are willing to work with borrowers who have fallen on difficult times to avoid this expensive process.
One option some lenders may offer is a short sale or selling the home for less than what is owed. Lenders lose less money during a short sale than during foreclosure, so it is a beneficial option for them.
Loan modification and refinance programs assisted by the federal government may make it possible for homeowners to once again be able to afford their mortgage payments. Ask your lender about any of these options that may fit your situation.
Loan forbearance is another option to consider. Sometimes, if you have kept up your loan payments over a period of time and simply have an unusual circumstance you are facing, lenders will be willing to delay or reduce your payments for a short period of time in order to give you the chance to bring the loan current again.
The key to getting this type of help is starting early. As soon as you know that you are facing a problem, contact your lender. You should only consider bankruptcy after you have pursued all other options for stopping foreclosure, because bankruptcy has a serious, long-term impact on your credit score.