Short sales vs. bankruptcy

As a real estate consultant in today’s market, I hear this all of the time… “I went to see a bankruptcy attorney and she told me that short sales are trouble and I shouldn’t even bother” or… “My attorney said that if I do a short sale, the bank will come after me for the balance no matter what”. Big surprise! coming  from the attorney that charges $3,000.00 up front to file their bankruptcy papers.
    The best way to determine if you should do a short sale as opposed to filing for bankruptcy is to ask yourself this one simple question. Even though my credit is going to be damaged now, do I want to own a home again sometime in the future? If the answer is yes, then you should seriously consider the idea of doing a short sale instead of a bankruptcy filing. You can always use bankruptcy as a last resort.
     The truth is that just because somebody goes to law school and passes the BAR exam, it doesn’t always mean that they have your best interest at heart. I know what you’re thinking… “But attorneys are known for being some of the nicest, caring and goodhearted people in the world”, but believe it or not some attorneys are just worried about get paid. How else are they going to pay off those student loans? [Fact: not even bankruptcy can eliminate student loans]  Oh, and do you think that attorneys inform these people that they can wait to file for bankruptcy up to 24 hrs before the house goes to auction? They probably don’t even care that a bankruptcy will stay on their credit report for 7 years. Why not? …That’s easy…they don’t have any incentive to care, but most people are just blinded by all those shiny plaques on the wall. So they just go along with whatever the attorney says,  after all…. They are attorneys!
      I think that some better advice would be to tell these people how it really works Something like this; hey, here’s an idea…why don’t you try your best do a short sale so that you can try and salvage your credit, then if it doesn’t work out or if you don’t like the terms that the bank is offering you, we can always file for bankruptcy as a last resort, we can even file the paperwork the day before the auction. Many people have the misconception that filing for bankruptcy will solve their housing problem. It won’t…bankruptcy may buy you some time, but it won’t buy your mortgage. It’s kind of like trying to permanently fix a gas leak with a piece of gum.
      The truth is that many of the people that file for bankruptcy would have been much better off doing a short sale on their property and moving on with their lives. Unfortunately, many of my clients are people that have gone through their bankruptcy and have been discharged by the court so now the Foreclosure process starts all over again and guess what I’m doing for them? You guessed it…a short sale. The only difference is that now they will have a bankruptcy on their credit for 7 years.
    I sincerely hope that I didn’t offend any attorneys with this post …and if I did…then sue me.