At this very moment thousands of families are struggling to find ways to avoid foreclosure and stay in their homes. In many cases, unforeseen circumstances, such as the loss of a job or unexpected medical bills, have caused California homeowners to fall behind on their mortgage payments. However, while some may not realize it, the truth if that filing for bankruptcy may actually help at-risk homeowners, as it may halt the foreclosure process.

Over the past few years of the housing crisis, when homeowners were unable to make their scheduled mortgage payments they would contact their lender in hopes of working out a loan modification that would result in more manageable payments. Unfortunately, many times the process of obtaining a modification is long, drawn-out and confusing -- and doesn't even always result in the homeowner actually receiving a modification.

In the past, homeowners have reported receiving arduous requests from lenders, such as resubmitting paperwork each time that they call and end up speaking with a different customer service representative. Some owners have even reported that their lender advised them to stop making mortgage payments in order to be eligible to renegotiate the terms of their mortgage. However, once these payments were in default, the homeowner's credit ended up getting tarnished, and the process of foreclosure continued on.

Fortunately, for homeowners who are facing foreclosure, there are still others options outside of a modification that could end up saving their home.

For example, by filing for Chapter 13 bankruptcy debts are restructured and a repayment plan is set up that gives the homeowner typically up to five years to pay back creditors. This can result in money being freed up that was once going to unsecured debts, like those tied to medical bills and credit card debt.

However, Chapter 13 is not for everyone, and some could actually benefit from a Chapter 7 bankruptcy where assets are sold off in order to payback creditors. In these cases, while assets are sold, it is sometimes still possible to hold on to the family home.

Source: Independent Record, "Averting Foreclosure," Sanjay Talwani, Feb. 6, 2012