Should I short-sell my home in lieu of a foreclosure?

A person who cannot hope to save their home by staying current or modifying their mortgage may be able to use a Chapter 7 to:

1. Limit their ultimate exposure on deficiency judgments;
2. Eliminate liability for cancellation of indebtedness income that may
result from short sales, foreclosure or the like;
3. Eliminate their accumulated credit card debt; and
4. Get a fresh start.

Many people are simply not benefited by a short-sale. A short-sale means they no longer own the property and are subject to the whims of the new owner, including rent obligations. These same people often have a mountain of other debt. Had they simply filed bankruptcy, they might have gotten rid of it all and stayed in their home longer.

Do not be fooled by common misperceptions. Bankruptcy is alive and well. Mortgage and other secured debt often helps a higher income family or individual qualify for a "straight" Chapter 7 bankruptcy.

The perverse truth is that families without mortgage debt and who have substantially lower income in many instances have to file a Chapter 13, while higher-income earners with secured debt obligations may simply file a 7 and be done with it all.

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