If you’re struggling financially, a bankruptcy or foreclosure could relieve your debt load. While both proceedings can provide a fresh start, though, they are vastly different, and the best approach will depend on the circumstances. If you’re not sure which one might be the answer, a bankruptcy attorney can evaluate your situation to determine how best to proceed. In the meantime, here’s what you should know about the major differences between the two.

What Happens During a Bankruptcy?

A debtor can initiate bankruptcy proceedings by filing a petition with the court. If the petition is for Chapter 7, a trustee will liquidate nonexempt assets, which might include vacation homes, newer vehicles, valuable collections, expensive musical instruments, and investments. The proceeds will then be used to pay back creditors, and any applicable debts that remain will be discharged. If the petition is for Chapter 13, on the other hand, the petitioner will submit a three- to five-year repayment plan. A bankruptcy attorney can help you devise a reasonable plan that the court is likely to accept. Applicable debts that remain after this plan has ended are then discharged.

Chapter 7 will remain on a credit report for ten years, while Chapter 13 will be reported for seven years. However, most people can secure lines of credit—albeit with high interest rates—within just a few months of filing. And, it may be possible to qualify for a mortgage within two to four years.

What Happens During a Foreclosure?

Unlike bankruptcy, a foreclosure is initiated by the lender, and every state has strict rules for commencing the proceedings. In North Carolina, for example, the lender must notify the homeowner of their past due amounts at least 45 days before starting a foreclosure.

If the homeowner is unable to catch up on payments, the lender will have the opportunity to assume ownership of the property. In other words, while bankruptcy can discharge all kinds of debt, a foreclosure only relieves the debtor of the mortgage. If you’re facing foreclosure but want to retain ownership, filing for Chapter 13 could help. If, on the other hand, you want the foreclosure to proceed, you can expect your credit score to drop between 200 and 400 points. The foreclosure will remain on your report for seven years; however, you will be eligible to apply for another mortgage in as little as two years.

If you need debt relief, turn to C. Roland Krueger Attorney and Counselor at Law. Practicing out of Lexington, NC, this bankruptcy attorney is proud to help clients regain their financial footing. For nearly 40 years, he has been representing individuals throughout Davidson County in bankruptcy court. He can also stop foreclosures, secure Social Security disability benefits, and fight traffic violations. To request a consultation with this bankruptcy attorney, call (336) 248-8464 or reach out online.