SHORT SALE VS BANKRUPTCY
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"Should I file bankruptcy or just let my mortgage lender foreclose"?
Basically, it is not an either/or decision.

The immediate relief is well felt since the filing requires creditor's collection process to immediately stop.  Once this happens there are time considerations before the bankruptcy is finalized and courts process the whole matter. There are other considerations too...

Short Sale Property Owners Beware!
If you have to file bankruptcy consider these items & get legal advice...
 

• It takes a long time to foreclose in our local market due to the sheer volume of distressed properties.
   
• Lenders would rather folks stay in the property and maintain it rather than have it be vacant and subject to vandalism.
   
• Short Sales leave no equity to offset debts and other costs in a bankruptcy.  If proceeding is necessary consider asking the courts to abandon the properties in the bankruptcy and allow them to be sold as short sales.
   
• Insurance should be maintained on properties to avoid exposure to losses and liability of the parties involved.
   
• Lengthy short sales may result in higher fees and costs to complete the bankruptcy.
   
• The costs of maintaining the property is far less than moving.
   
• A quick sale of the property could avoid future problems
   
• Properties not liquidated may haunt you later.  Be sure to use an attorney that specializes in bankruptcy and knows the laws in the State of Florida.

Note: If you file in Florida vs. another state be sure your attorney is made aware of the length of time the lenders in our area are taking to liquidate properties.  A lengthy delay in the lender taking back the property could result in higher costs along the way.

My understanding of bankruptcy is as follows:

• Bankruptcy does not stop foreclosure: it is a legal action filed by a person that cannot pay their debts.  It stops all civil proceedings against the debtor while the debtor is in bankruptcy. So, by law, a mortgage lender has to suspend all legal actions including a foreclosure action. However, a mortgage lender can file for relief from the automatic stay, and when the relief is granted, simply proceed with the foreclosure action.  Bankruptcy does not allow a person to keep their home without paying the mortgage lender. Bankruptcy only slows down the foreclosure process.
   
• Bankruptcy Codes Require Counseling:  The new law requires that a debtor receive credit counseling from an approved non-profit credit counseling agency for 180 days prior to filing Chapter 7 or Chapter 13 bankruptcy.  These laws and others regarding filing are changing all the time so it is highly recommended consumers use attorneys specializing in bankruptcy in order to get the best advice.
   
• There are different types of bankruptcy such as Chapter 7, Chapter 13 and alternatives to consider depending on your circumstances.
   
• Not Everyone Qualifies for Bankruptcy.  Bankruptcy is not an automatic proceeding.  Before you decide to proceed get the facts regarding your own personal situation.
   
• There are legal fees for bankruptcy which may be more than catching up the mortgage.
   
• Bankruptcy is very detailed.  You will need to do a lot of documentation.  It is not an automatic process.  The more you own the more complicated and costly the proceedings may be to complete.
   
• Bankruptcy effects your credit for up to 7 years maybe more.
   

In the end it seems a seller has nothing to lose by proceeding with a short sale even if inevitably they must file bankruptcy.  If the property sells during the 180 days required for credit counseling the property will not delay the proceedings.  Many times in this market properties are worth less than what is owed so these properties are not included in the workout and stay in the name of the seller after the bankruptcy is discharged creating a possible liability for the seller until the property is sold.