Bankruptcy vs. Short Sale

This week I got a call from Dan and Betty with a beautiful Four bedroom house in Kentwood Michigan. They are facing a Michigan foreclosure and wanted to know if they should consider a bankruptcy or a short sale. I get this question almost every week as it’s something that should be carefully considered.

Of course, I’m not an attorney, so I can’t give legal advice. Most families facing foreclosure have no money to pay an attorney, so I’m forced to give them something to think about. Perhaps this will help you too.

If you’re contemplating the same decision, ask yourself this simple question: “If it weren’t for the house, would you still consider a bankruptcy?” In other words, do you have other debt you need to rid yourself of?

If the answer is “no” (like most families I talk with), you’ll likely decide to see what we can accomplish with a short sale first (at no charge of course). After all, if we get all of the debt forgiven, you’d have no reason to spend the time and money on the bankruptcy right? Did you know that bankruptcies are also public record? Most families would rather avoid that embarrassment unless they have no other choice (additional debt). Consider also that you can only file a chapter 7 bankruptcy once every 7 years and you need to decide if you want to “play that card” now, or hold on to it for a more urgent hardship.

If we can’t get the short sale done (we have about an 80% success rate when a qualified buyer is found), and the lender seeks a deficiency after the foreclosure, then you can consider filing for bankruptcy.

Of course if you do have additional debt that you can not live with, now is the time for you to make an appointment with a bankruptcy attorney so you can look at the pros and cons of going that route. Of course I can refer a good one to you (not someone who simply is going to try to “sell” you a bankruptcy.

Still confused? Give me a call and I’ll do what I can to help.


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