Bankruptcy is a federal court process that places you under the protection of the bankruptcy court while you try to repay your debts (Chapter 13 bankruptcy) or removes the debts altogether (Chapter 7 bankruptcy).

When you file for bankruptcy, an automatic stay goes into effect; the stay prohibits your creditors from attempting to collect the debt without the approval of the court, even if the bank is in the process of foreclosing on your house. Filing for Chapter 13 in this situation could buy you the time you need to sell the house yourself and pay off the mortgage.

Bankruptcy should not be entered into lightly. It has far-reaching effects on your ability to obtain credit, buy a house, buy life insurance, and sometimes even get a job. There are other factors that might make one type of bankruptcy better for you than another. Consult a good bankruptcy lawyer and provide all the details of your financial situation so she can counsel you concerning the option that best suits your needs.