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Short Sale vs. Bankruptcy

The American economy seems to be recovering, albeit on very wobbly legs.  The housing market, however, is still in rough shape.  Many American homeowners are unable to meet their debts, either because of adjustable rate mortgages that got ahead of them or because of recent job losses.  Whatever the reasons for their struggle, many homeowners are now facing foreclosure and weighing all of their options.  After a bit of research, many narrow down their decision to one of two choices—short sales or filing for bankruptcy.  While neither is a particularly appealing option, homeowners will likely have to consider both and then decide on the lesser of two evils.

While foreclosure is a dirty word for many Americans, bankruptcy is usually thought of in even lower regards.  It conjures up destroyed credit scores and financial futures.  In actuality, bankruptcy is designed as a way for someone to get something of a fresh start financially.  Essentially, it relieves a debtor of many of their debts, albeit with some fairly harsh penalties.  Normally bankruptcy involves the total liquidation of a debtor’s assets.  Any money made through the liquidation is divided amongst those that they owe money to, according to different factors.  Bankruptcy will indeed decimate your credit score and make it almost impossible to receive any type of loan for quite some time, seven years in general.

Short sales are an alternative that many Americans have begun to utilize.  Essentially they involve the sale of your property for a lower amount than you actually owe the lender for it.  It may be hard to convince a bank to agree to these arrangements, but under certain circumstances they will.  Your credit will still be negatively impacted, but not quite as dramatically as if you slipped into foreclosure or declared bankruptcy.  There are certain tax implications that may make it more difficult to go with this option, although for many people it is a much more attractive course of action.

The sad truth is that there is no easy way to escape foreclosure.  Whether you elect to filed for bankruptcy or attempt to get your lender to agree to a short sale, you’ll still face repercussions, especially in your credit score.  No matter what path you take, the years ahead of you will be difficult.  But a bit of research will help you decide on the right course of action.  Consulting a professional may be a very wise idea, as the intricacies involved in any of your options are likely to be complex.

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