Do lenders view Chapter13 bankruptcy more favorably than foreclosure? For the answer, let's take a look at the underwriting standards of a Fannie Mae or Freddie Mac backed loan. If you file for bankruptcy, you only need to wait four years after bankruptcy to qualify for a Fannie Mae or Freddie Mac mortgage. But if you lost your home to foreclosure, you may need to wait up to 7 years after the foreclosure to qualify for these government backed mortgages.
One of the reasons that many mortgage lenders favor debtors who filed for Chapter 13 bankruptcy over those who allowed their property to go into foreclosure is because repaying a mortgage in bankruptcy shows that you have every intention of repaying your debt. Chapter 13 bankruptcy filing also shows that you were willing to face the reality of your financial situation and made secured debt such as your mortgage a priority. In Chapter 13 bankruptcy unsecured debt can often be partially or fully discharged allowing a debtor to avoid foreclosure and commit more of their financial resources to repaying a mortgage.
While it may not be possible for every debtor to remain in their home with bankruptcy, filing bankruptcy can offer other options. For example, a debtor who files for bankruptcy may be able to convince the lender to allow them to sell the property in a short sale or return the property in what's called a deed-in-lieu of foreclosure. Whichever process the debtor chooses it will be more manageable for both themselves and their creditors in bankruptcy.
(source: http://today.msnbc.msn.com/id/41787682/ns/business-personal_finance/ )