Avoiding Foreclosure: Declaring Bankruptcy Sometimes Helps

It's sad but true. Americans are increasingly filing for bankruptcy in order to avoid foreclosure.

Katherine Porter, a bankruptcy expert at Harvard Law School, estimates that 75 percent of Chapter 13 filings fall into this category. "Despite all the government programs, bankruptcy is probably the most commonly used foreclosure prevention technique," Porter tells HousingWatch.

If you'd like to file for bankruptcy but are worried about your credit, Porter says don't worry. "Those who have a foreclosure filing against them, their credit score has already taken such a big hit that the additional blemish of bankruptcy is not particularly significant," she says.

It's sad that we've had to resort to this, but the truth is that bankruptcy filing stops the foreclosure process cold. Lenders aren't even allowed to try collecting debts until a judge gives them the OK.

It's only a short reprieve though, says Porter, lasting a couple of months at the most because by then most court cases have been resolved.