Should we continue with the short sale or go into bankruptcy?

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We have been through a failed short sale twice with our home. Both buyers walked before we could get the approval finalized. We stopped paying both our mortgages and our HELOC back in April due to financial reasons. We moved into an apartment in July with a 12 month lease. With the latest buyer walking last week, the only way we can afford another short sale is if we break our lease and move back into our home. We cannot do a loan modification because we do not qualify. The apartment complex stated that we need to give 60 days notice and an additional 2 months rent to break the lease. That’s over $ 6000. We don’t have that kind of money. Our house is almost in foreclosure. We really don’t want to go into bankruptcy. Does anyone have any experience with this or any recommendations? Thank you.
We don’t qualify for the loan modification because our current loan is already less than 31%. We are quickly running out of time to do another short sale.
We do not have any other debt other than a school loan and car payment, which are both small monthly payments. All credit cards were paid off awhile ago. We don’t even own a credit card now.
Everything is paid using an envelope system (Dave Ramsey style.)

  1. Reply
    May 1, 2011 at 2:27 am

    short sale so your credit isn’t completly ruined

  2. Reply
    Katie The Mortgage Mod Lady
    May 1, 2011 at 3:10 am

    What is the reason you don’t qualify for a mod?

    If you cannot do another short sale, maybe just let them foreclose? Bankruptcy is worse than foreclosure, from what I’ve heard.

  3. Reply
    May 1, 2011 at 3:34 am

    Your credit is ruined either way, but with bankruptcy its a clean sweep, and banks cannot come back and try to get money from you.
    You choices are limited by the fact that you cannot afford to move back into your house, which the bank could foreclose on you as soon as you move back in. Stay and pay 799.00 for the BK.

  4. Reply
    May 1, 2011 at 4:10 am

    I recommend that you interview at least 3 or 4 Attorneys who specialize in bankruptcy law.

    Ask them about their recent experience with cases like yours.

    Hire the Attorney that you think is best for your case.

    In short sales the banks often insist on a promissory note from you to cover the unpaid balance of the loan.

    I realize that other people say that a short sale will protect your credit rating. That is not true. a short sale is devastating to your credit rating. Also missing mortgage payments is devastating to your credit rating. The damage has already been done.

    Whatever you do, DO NOT BREAK YOUR LEASE!!!!!!

    That is extremely important. You will not be able to rent anything that is decent if you break your lease!!!!!

    At least you have a place to live and you appear to have a good relationship with your landlord.

    Keep that good relationship with your current landlord. Given your current credit status, you are at risk for not being able to get a decent place to live at all.

    At this point it appears to me that you are much better off with bankruptcy protection and the advice of an Attorney who is competent and has a great deal of experience with cases like yours.


  5. Reply
    May 1, 2011 at 5:06 am

    Honestly, go with bankrupcy. A lot of bankruptcy will let you keep your house and your car, as well as your personal property that does not total over a certain amount. It does wreak your credit, but it is not the huge blow that everyone makes it out to be, and there are ways to slowly rebuild your credit.

    Bankrupt will give you a clean slate to start from, and you can use small personal, credit building loans to build it back up. It will stay on your credit report for seven years, but after that time it falls off, as well as all the other financial issues that brought you to this situation.

    My mother filed for bankruptcy, and two years later she was eligible to buy a new car and get credit cards if she wanted to, due to the fact that those creditors know you can not file again for a certain amount of time. The interest rates are a little higher, but that too, eventually goes away as you improve your credit and show off your trustworthiness.

    Just do not let this become a habit. Start living within your paychecks, and avoid credit cards and large ticket purchases. A used car instead of a new car will save you thousands, and will not depreciate by 15% the second you drive it off the lot.

    Yes, bankruptcy is bad, but it is not the lifelong nightmare everyone likes to claim it is. You can and will come back from it. And if it lets you keep your house, so much the better. Feel free to email me if you would like to discuss it in more detail.

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