Bankruptcy, both Chapter 7 and Chapter 13, is often advocated by bankruptcy lawyers and debt relief agencies. They say that BK is a way to begin again your financial life.
BK typically follows repossession and home foreclosure, along with creditor harassment and wage garnishment. Bankruptcy is often brought on by the Three D’s and U– death, divorce, disease (medical bills) and unemployment. ARM resetting (adjustable-rate mortgage interest rate change) causes innumerable foreclosures and short sales.
In contrast to the reactionary nature of most bankruptcies, strategic foreclosures are actively begun by homeowners who are underwater. Their homes are worth much less than the mortgage balance, and they realize that breaking even will likely require years of mortgage payments.