Anyone considering filing personal bankruptcy is probably going over and over all the impacts of filing both over the short term and the long term. One huge matter to consider is foreclosure of your home, and particularly whether foreclosure or bankruptcy is worse for your credit score. However these two are so different, it’s not really comparing apples to apples. Here are some basic issues you need to review when deciding between bankruptcy and foreclosure.

To start with, a foreclosure is based on your mortgage, which is basically just like any other secured loan, similar to a car loan. Should you fail to pay, the lender is still protected because the loan is secured by your asset, and the lender can take back the home to pay for the debt. This repossession is called a foreclosure. Just like repossession of any other asset, like a car, a foreclosure is a serious mark on your credit report and lower your score.

When considering bankruptcy however, this is a different situation. Bankruptcy allows you to eliminate or repay multiple debts or set up a repayment plan. Credit reporting agencies won’t tell which is worse for your credit, a bankruptcy or foreclosure, but if you’re in a bad enough position to file bankruptcy, it’s likely your credit is already pretty bad. Thus a bankruptcy likely won’t result in much lower of a credit score.

Yet here are the big issues to consider before making a decision. If you still haven’t been foreclosed on by your lender, and you decide to file bankruptcy, remember that you can still lose your house to a sale because the mortgage lender is able to ask the bankruptcy court to allow a sale in order to pay your debt. A sale would more likely occur in a Chapter 7 bankruptcy, where most of your debt is discharged, while in a Chapter 13 bankruptcy you set up a payment plan that might allow you the chance to keep your home by making payments. Using a Chapter 13 bankruptcy could thus help you avoid foreclosure.

As for your credit score, a bankruptcy may not lower your credit score number too much lower, however your bankruptcy filing stays on your credit report for ten years. So with a bankruptcy, in five years you might have a better credit score but lenders could still see your bankruptcy filing from five years ago, and turn you down on that basis. Foreclosure on the other hand is like any other repossession or single bad debt. It stays on your credit report for seven years, but once you restore some good credit after a few years you could once again qualify for credit. It’s important to recognize then that your credit score is not the only thing to consider between bankruptcy and foreclosure.

Before you make a choice between bankruptcy or foreclosure, find a good bankruptcy lawyer to discuss your situation, and contact a non-profit credit counseling agency. These groups can best help you decide how your income, debt and expenses will be impacted in either case. Some people may prefer to keep their credit score as high as possible, but others may want to keep their home, no matter the impact on their score. Discuss your situation with a professional, to see what your next step should be.

Are you trying to determine which is worse, bankruptcy or foreclosure? Find bankruptcy advice at Bankruptcy Help Online.