Bankruptcy may help end your foreclosure nightmare so you can start seeing light at the end of the tunnel.  Filing for bankruptcy immediately stops collection calls.  In addition, certain categories of property, mainly homestead or primary residences, may not be taken by creditors after a debtor files for bankruptcy.  This protection may also include motor vehicles up to a certain value, some clothing and household furnishings, life insurance and portions of earned wages. Any obligations to repay debts are erased through the discharge of the debts during the bankruptcy process. Therefore, the debtor is no longer legally liable for the debts, which will help a debtor’s ability to maintain a reasonable level of credit payment history over the course of the next ten years.

But there are some disadvantages to filing bankruptcy. Most importantly, it will affect your credit for at least 7-10 years.  While a foreclosure case has a mandatory 7-year statute of limitations, bankruptcy does not.   Other disadvantages include losing credit cards and non-essential possessions, the inability to obtain a mortgage (and other loans) and embarrassment.  Certain other debts will not be discharged in a bankruptcy, and the bank has up to five years to come after the borrower for the deficient amounts.

Please be aware that neither JoAnn Taylor nor HarderandSmarter Realty is engaged in the practice of law; the information in this post is not intended as  legal advice.  You are strongly advised to seek legal counsel if you think bankruptcy may be right for you.