Is it better to Short Sale my House
or to file Bankruptcy?

That depends on your situation but from my perspective as a Washington Bankruptcy attorney, it is usually better to file bankruptcy.

Here's why:

Unless your lender agrees to waive off on (forgive) the deficiency (which is unlikely), after the sale you will probably still owe the lender $20,000-$120,000+. Your obligation on your promissory note (or promissory notes if you have a second mortgage) will not be discharged unless your lender agrees to waive the deficiency. Also, if there is a second mortgage with a different lender, the likelihood of the second lender agreeing to waive off on the deficiency is close to zero. There is no motivation for the second mortgage holder to forgive your debt since they will not be receiving any Short Sale proceeds.

The only way that this can work for you is when there is either a) only one mortgage or two mortgages, both with the same lender and b) you convince your lender to forgive the deficiency.

Otherwise, the following will probably happen: you finish the Short Sale without the lender's agreement to forgive the deficiency, you take a 100+ point hit on your credit record, your credit report continues to suffer because of non-payment on your promissory note(s), the lender sues you for non-payment on the promissory note(s), then you have to file bankruptcy anyway. And your credit report is now as low as it can get.

On the other hand, if you had simply filed a Chapter 7 Bankruptcy in the first place, your credit report would be MUCH higher, most (or all) of your other debts would be gone, and you would have been on to bigger and better things much earlier and with much less stress.

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The Law Office of Matthew D. O'Conner is dedicated to helping clients file bankruptcy while retaining their dignity and pride. We provide assistance, legal counsel and advice and will be able to answer your bankruptcy-related questions and help you file a Washington bankruptcy.

Contact us today at (206) 782-0722 for a free consultation - it's entirely confidential.

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We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

This web site is for general informational purposes only and is not legal advice.

The information contained on this web site is in no way intended as a substitute for legal counsel, and your receipt of the information does not give rise to a lawyer-client relationship between Matthew D. O'Conner and you. The ramifications of the law for any particular situation depend on a variety of factors, so you should seek professional legal counsel before acting upon any information contained on this web site.