Foreclosure vs. Bankruptcy in California: What's the Difference?

Foreclosure

Foreclosure is the process your lender uses to take your home when you stop making mortgage payments. In California, it follows a non-judicial process — no court needed — making it relatively fast once the process begins.

Bankruptcy — Chapter 13

Chapter 13 bankruptcy is a federal court process that allows you to repay debts over 3-5 years under a court-supervised plan. The moment you file, an automatic stay takes effect — stopping foreclosure immediately.

Chapter 13 allows you to catch up on mortgage arrears over the plan period, keep your home as long as you make plan payments, and eliminate or restructure other unsecured debt.

When Bankruptcy Makes Sense

Bankruptcy is the right tool when the sale date is imminent and there's no time for loss mitigation, when you have significant unsecured debt alongside the mortgage problem, or when previous loss mitigation attempts have failed.

NFDA's Role

NFDA is not a law firm and does not file bankruptcy. We assess your full situation and coordinate with licensed bankruptcy attorneys when that's the right path. Visit www.thenfda.com.