Is It Better to Refinance or Declare Bankruptcy to Stop Foreclosure?
Is It Better to Refinance or Declare Bankruptcy to Stop Foreclosure?
Dec
09, 2025
Is It Better to Refinance or Declare Bankruptcy to Stop Foreclosure?
When missed mortgage payments start to pile up, many homeowners wonder whether they should try to refinance or declare bankruptcy to stop foreclosure. In British Columbia, both paths exist, but they are not equal, and they do not lead to the same long-term outcome.
If you live in Surrey, Langley, Delta, White Rock, Abbotsford, or anywhere in the Fraser Valley, this guide will help you understand the difference so you can talk to the right professionals and choose your next step with more clarity.
What Refinancing Does
Refinancing replaces your current mortgage with a new one, usually with:
A different lender or product.
New payment terms.
A new interest rate and amortization schedule.
If you have equity and at least some income stability, refinancing can:
Pay off your existing mortgage.
Bring arrears back to zero.
Roll other debts into one payment.
In simple terms, refinancing keeps you in the home if the numbers make sense.
What Bankruptcy Does
Bankruptcy is a legal process that deals with unsecured debt. It is handled by a Licensed Insolvency Trustee and overseen federally.
Bankruptcy may:
Eliminate or reduce unsecured debts like credit cards and lines of credit.
Stop certain collection actions and garnishments.
Affect your credit for many years.
If you own a home with equity, bankruptcy can become more complex. It may not automatically make sense to file if the house is your largest asset.
Stopping Foreclosure With Refinancing
Refinancing can stop foreclosure when:
You have enough equity to support a new mortgage.
Your income can support payments, even if the rate is higher.
A new lender is willing to fund the deal.
Refinancing is strongest when:
You start before the lender files a Petition for Foreclosure.
Your credit, while bruised, is not completely damaged.
You work with a broker who knows how to handle arrears.
Refinancing is focused on keeping the home and resetting your payment structure.
Stopping Foreclosure With Bankruptcy
Bankruptcy may temporarily slow or complicate foreclosure, but it does not always save the home. It is mainly designed to address unsecured debt.
Bankruptcy may make sense when:
Your unsecured debt is overwhelming.
You have little or no equity in the property.
You do not see a realistic path to keeping the home.
In some cases, bankruptcy and a planned sale work together. The home is sold to unlock equity, and bankruptcy deals with remaining unsecured debt.
When Refinancing Is Usually Better
Refinancing is often the better choice when:
You want to stay in the home.
You have equity and some borrowing power left.
Your main problem is short-term cash flow or high-interest unsecured debt.
Refinancing preserves your ownership and can give you a structured reset instead of a full financial restart.
When Bankruptcy May Be the Only Realistic Option
Bankruptcy may be more realistic when:
You have very little or no home equity.
Your income is not enough to support any reasonable mortgage payment.
Your unsecured debt is so high that even refinancing cannot solve the problem.
In these situations, the priority shifts from “save the home” to “rebuild my finances.”
Where Selling Fits In
There is a third path that many owners overlook. Selling the home before foreclosure often protects more equity and avoids both refinancing strain and the long-term impact of bankruptcy.
A planned sale can:
Pay off the mortgage and arrears.
Free you from pressure and collection calls.
Leave money in your pocket if you have equity.
For many Fraser Valley homeowners, a strategic sale is the most practical way to reset.
Questions to Ask Before Choosing
Before you choose between refinancing, bankruptcy, or selling, ask:
How much equity do I have in my home today?
Can I realistically afford a refinanced payment?
Is unsecured debt the main problem, or is the mortgage itself too heavy?
What will each option do to my credit and stress level over the next five years?
These answers will guide you toward the right professionals to speak with next.
How Mansour Real Estate Group Helps
We are not insolvency trustees or bankers, but we are experts in the value and sale of your largest asset. Our role is to:
Give you a clear picture of what your home is worth today.
Help you understand how much equity you can protect.
Support you if you decide that selling is the best path.
Coordinate with your mortgage broker, trustee, and lawyer so the real estate piece is handled properly.
With the right information, you can talk to your lender, broker, and trustee from a position of clarity instead of fear.
About Mansour Real Estate Group
The Mansour Real Estate Group, led by Mohamed Mansour, MBA and Associate Broker, is a top performing real estate team in the Fraser Valley. With more than 21 years of experience and over $750 million in completed sales, the group is trusted for divorce, estate, downsizing, and family related property transactions across Surrey, Langley, Delta, White Rock, and Abbotsford.
