Ann Arbor, Michigan Bankruptcy attorney Lander McLoyd explains, "Which is worse on your credit report Foreclosure or Bankruptcy?"
A foreclosure is very serious to mortgage lenders, more serious than bankruptcy, as long as the bankruptcy doesn't include the house.
Try to avoid the foreclosure. If you're having trouble making payments, or even behind by a month or two, contact your lender before the process goes any further. Even if you've gotten an official Notice of Default saying you're several months behind, you still have time before the formal foreclosure process begins.
If you really want to keep the house, try to work out a plan to get back on track. There are a few ways this can be done.
1) You can make up for the missed payments all at once,
2) You can negotiate to spread out the payments or you can come up with a new plan,
3) You can have the loan modified, at a lower interest rate or extend the length of the loan from 15 years to 30 years, or you can ask for forbearance which means the lender suspends payments until you can get back on your feet.
If know you cannot make the payments because you lost your job or you bought too much house for your income, then these options are not going to help. You may just have to allow the foreclosure.
During the foreclosure proceedings you can save the mortgage amount to pay other debts or to secure another place to live.
If you have questions, contact Michigan Bankruptcy Lawyer Lander McLoyd for a free initial bankruptcy consultation.