Bankruptcy or short sale?

Question

like many people we are upside down on our house we bought for 410 now same house is going for 250 to 300. we get letters everyday from people offering help. agent we spoke to says short sale is an option. While my husband wants to file for bankruptcy?> what do you suggest?

Answer 1

Short sales are tough to do and you may end up just wasting alot of time trying to get one to go thru (and end up in foreclosure anyhow).  Still, if bankruptcy is the only other option I'd at least try to short sale it. It can't hurt to try and if it did go thru that would really help you out.  

Answer 2

if you do a short sale you will have to pay taxes on the difference. you paid 410 for the house and if the bank agrees to settle for 310 that is a short sale. unfortunately you will have to pay the difference between 310 and 410 in taxes as the government says that since you got the extra 100 from the bank and now they are forgiving the debt, its income so hence the taxes. if you file bankruptcy then you would not have to pay any taxes although there are other issues to worry about!!!

Answer 3

Try the short sale first. Bankruptcy is the last option.  

Answer 4

Bankruptcy is as good an option for your finances, as a divorce is good for your marriage.

It's only an option after everything else has failed (including a short sale offer)

Answer 5

Would you be considering a short sale or bankruptcy if the value of your house had stayed at $410,000 ?  If not, then you should not be considering the same now.

If you simply cannot afford the payments, then a short sale (while a serious detriment to your credit) is somewhat better than a bankruptcy in that regard.  Be aware that, although the federal government has temporarily allowed that the deficiency is not taxable income, not all states have gone along with that.

If you do a short sale, the lender will issue you a Form 1099 for the amount of 'the forgiven debt', and it will be up to you to determine if your state will require you to claim this as taxable income.

Answer 6

Hello Juan,

           It is likely that NEITHER is necessary for you to enjoy home. family and friends. Relax and take a deep breath. Lots of people in your situation. Give one another a hug because financial financial stress is the number one cause of marital strain and dissolution. NO, feelings of financial pressure are not lessened by ego salving affairs. That said let's return to basics.

         A short sale may relieve your mortgage indebtedness. Unfortunately, I see very few successes in this area. In several dozen attempted short sales I have seen, only a very few succeed.

           Should you follow this path, expect to invest dozens of unpaid hours of time filling out paperwork without ever closing your transaction.

           The reasons short sales do not work are varied beginning with general incompetence by lending company employees. Further many loans have been sold, transferred or assigned in part or entirety and resold to other lenders. No lenders desire to accept responsibility to accept less than full face loan value and many are not empowered to act through the fractionalized ownership. This assumes the loan is traceable beyond servicing agents who do not care and have no personal  financial stake  seeing your deal succeed.

           Short sale work needs to be done with a retainer, be non-contingent upon closing and set forth an hourly billing rate. This is fine for attorneys, accountants and business professionals assuming you have the budget.

Realtors favoring the big percentage at the end typically lack the will, expertise to provide the required time investment on a contingency basis. You cannot blame them. After listing the property they must first establish prior to submitting any offer that they expect their  percentage to be paid by your lender at a prearranged mutually acceptable amount. Many lenders have their own realtors and this will force real estate agents to split fees or be offered insufficient fee amounts.  The issue of commission is often a barrier to completing short sales. How many lenders want to accept a lesser amount of a loan balance and come up with cash to pay real estate commissions?



        Your bankruptcy idea is valid only if you have other non-mortgage debt that you cannot pay or re-negotiate. After foreclosure in most states, you will not face a deficiency judgement for a family occupied property. The deficiency judgment rights are often voluntarily sacrificed by lenders for their right to proceed against the property in a expedited foreclosure method. A call to your local competent realtor will result in learning about your State's laws. Stay in your property until the foreclosure is completed and after you have been served a Notice to quit. This can take between six months and one year depending upon your lender and laws of your state.

       People in possession are often paid off by lenders to voluntarily remove themselves from the property by providing CASH in a situation referred to as a "keys for cash" transaction. I have seen this amount range from a few hundred dollars to several thousand dollars.

       Your bankruptcy rights are more precious. You can file only once in seven years. Generally, you should not file unless owing more than four years gross income to unsecured creditors.

        At this point all your creditors can do is file judgements against your real And if by the sightest possibility the creditor seeks to attach wages the filing of a Claim of Exemption should reduce any amount sought to be reduced to a tiny monthly level.

        THE PEOPLE CONTACTING YOU ARE VULTURES PREYING UPON YOUR FEAR YOUR PANIC AND YOUR ABSENCE OF KNOWLEDGE. Slow down..... Keep your checkbook closed.  What is it that you want. If you can make the payments, keep the house and consider it rent. Who cares about sale value if you are enjoying it?  In five to ten years your property will have come back in value. Maybe less time through inflation...

           Take your time and decide your favored course of action. Presently, you have no pressing urgency....Really! Take time to listen to people but come from a position of knowledge and strength. You are in control of your destiny.  GOOD LUCK.    

Answer 7

Try to negotiate a short sale if you can.  A short sale will hurt your credit but no where near as bad as filing bankruptcy.  A bankruptcy will stay on your credit for 7 years.