(Note: Bankruptcy can—and most certainly will—tarnish your image, can damage your credit, and can be declared once. Therefore, this avenue should be very carefully considered, and only as a last resort.)
WHAT CAN YOU DO IF YOU'RE UNABLE TO KEEP YOUR HOME?
Having gone through the nightmare(s) outlined above, there’s a possibility that you just aren’t able to keep your home. When you hit this low bar, you can either short sale by aligning with an agent, or go with a Deed-in-Lieu of foreclosure (DIL). Short sale by aligning with an agent. Let’s take this scenario: What you owe your local government is more than the value of your property. Will it be worth it to declare bankruptcy? Will it in any way get rid of your financial troubles? The answer to these questions is simply, NO. This is when you enlist a real estate specialist to market the property, negotiate a short sale arrangement (agreement) with your tax collector, and advise and consult on the best possible way to balance your rather shaky financial situation. The short sale will play a key role in helping you evade foreclosure. It will also reduce the damage done to your credit score. You may also evade a deficiency judgment in case your tax collector forgives your outstanding debt in its entirety, as per the terms stipulated in the 2007 Mortgage Debt Relief Act. Thanks to the short sale, the foreclosure will be kept off your credit record. Another beneficial note for folks in this class is the fact that the Federal National Mortgage Association (FNMA) has shortened the compulsory waiting span to establish a credit history following a short sale to two years. This is quite a relief when compared against the previous five- to seven-year waiting
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