Bankruptcy is a legal proceeding also; one in which you get to declare your inability to pay your debts as they become due. You may get the chance to be discharged from continuing personal liability, or you may ask the court to give you the chance to reorganize financially through an extended period of time in which to pay all or a proportion of your mortgage.

Simple though this seems, the signing into law of the Bankruptcy Abuse Prevention and Consumer Protection Act in May of 2005 has changed a lot of things. To start with, there is now allowance in the law to preclude states from writing their own individual bankruptcy laws, and secondly, it makes it harder for folks to file for bankruptcy under Chapter 7 of the bankruptcy code.

With a Chapter 7 filing, you would have been able to liquidate or lower some debts in exchange for forfeiting some assets, and that would be the end of it. But because some more inflexible criteria that have been included in the process, you simply may not qualify; you may want to talk to your legal counsel about it.

You still have a chance with a Chapter 13 bankruptcy filing. If you win, it simply means that you will still have to make up for what you owe to the credit firm, except that you may obtain some relief from the court to repay your debts at a set lower amount each month per month over a period of three to five years. Better than nothing, I suppose. But look on the bright side - you still get to keep your home, so sure, bankruptcy can stop foreclosure if done right, and if you meet all the necessary requirements.