Foreclosure doesn’t necessarily mean bankruptcy.

However, some people choose to file for bankruptcy to avoid losing their homes. For example, if you’re a homeowner that’s been foreclosed upon recently, you can file bankruptcy to avoid losing your home even as your bank is going through the foreclosure process in your local court system. Just because a bank has begun foreclosure proceedings against you doesn’t necessarily mean you can’t file for bankruptcy and keep your home – in fact, bankruptcy laws were put in place to help you in this situation. In most cases you can wait all the way up to the auction sale of your home by the sheriff at the court steps to file your bankruptcy petition and this can stop foreclosure. This is of course an exaggeration – but you get the point.

Of course, a bankruptcy is a last-ditch effort when nothing else fails to prevent foreclosure and when you have no way to pay your outstanding debts.

Remember that if you simply let the house go to foreclosure you may have the lender coming after you for the net difference between the loan balance and what the lender received after the house is auctioned. Some lenders allow short sales, where the lender will accept a significantly lower amount for the home and forgive the remaining loan balance.

Read these posts to find out more on this subject:

• How Short Sales Can Save You From Foreclosure
• Foreclosure: Questions and Answers