If you have fallen behind on mortgage payments and are barely managing to stay current on some other financial obligations, there is no time like the present for you to consider bankruptcy. Depending on how far in arrears your mortgage is and your financial circumstances, filing for bankruptcy may enable you to keep your home.

Before you rush to file a petition for financial insolvency, you should understand which bankruptcy chapter is more beneficial for your situation. Consider the following information about bankruptcy and how you could use it as a defense against foreclosure.

Chapter 7 bankruptcy can buy you more time

Once you file for Chapter 7 or Chapter 13, the courts will issue an automatic stay order that prohibits creditors/lenders from continuing their collection activities while the courts process your petition. If you file for Chapter 7, you need to understand that it does not stop foreclosure; it merely delays it. It is a good avenue to take if you feel that your dire financial troubles are short term and resolvable in a few months. The automatic stay of Chapter 7 bankruptcy and completion process can give you enough time to make up the delinquent payments with your lender.

Chapter 13 can help you beat foreclosure

If your income does not make it possible for you to bring your mortgage current because you need more time, you may find it more beneficial to file for Chapter 13. This type of bankruptcy gives you significantly more time to catch up on your mortgage and other delinquent payments. A bankruptcy trustee negotiates on your behalf with your creditors to restructure your payments into a three- to five-year repayment plan. Fulfilling the obligations of the payment plan will entitle you to keep your home and avoid foreclosure.

Keep in mind that most lenders do not start the foreclosure process until there are several consecutive missed payments.