I hate that I'm even here asking this, but I would like some input.
XH and I divorced earlier this year. As a condition of the divorce, the court requires us to dissolve joint assets. Neither of us can buy the other out of the house, so we have to sell it. Our house is underwater and there is no hope of selling it for what it is worth.
The kids and I live in the house. XH has moved out of state.
My realtors and local housing counselor are advising me to go with a short sale from the start. The bank we are working with won't commit to forgiving any deficiency, and it is likely that we'll be on the hook for $20K or more. We thought we could potentially avoid a deficiency via a short sale, but it looks like that will not be true. The complicated part is, we have two mortgages. The first would likely be covered and/or forgiven. The second would not ($20K).
If we end up with that kind of deficiency, XH is planning on filing bankruptcy. Because we have joint debt, I believe I will have no choice but to also file bankruptcy if he does (anyone know?). If we go the short-sale route, we know that I will have to be out of the house by Oct 1st (it will officially go on the market July 1st per divorce agreement and realtor contracts, and the bank we are working with only gives 90 days for a short sale before doing deed-in-lieu or foreclosure.)
But my friends who went through this a couple of years ago are advising me to meet with a bankruptcy lawyer and consider going the foreclosure/bankruptcy route from the start. They believe that it will be better for me and my family to do it that way -- that it will allow me to stay in the house longer while we figure out where we are going next, and save us money in the process, as well as the boatload of stress that goes along with a short sale. I'm in the process of getting an appointment with a lawyer. My friends said if you start foreclosure and then file bankruptcy the foreclosure gets put on hold until the bankruptcy is finished, and you have more time and less stress with the same result.
The end result will be, we will be moving out of our house and we'll have significant debt that will result in bankruptcy. Our credit will be shot, and we are expecting this no matter what the path or the outcome. It sounds like a foreclosure will let us stay in our house longer, cost us less, and be less of a stress and headache than short sale. I wonder if this is true, and how to weigh those options.
I am wondering what other people's experiences have been, if you're willing to talk about them.
For the record, no, I'm not happy about any of these outcomes; I am not someone who reneges on my financial responsibilities and I never imagined I would be in this situation. My XH left me suddenly with a heavy burden caused by his irresponsibility (as a taxpayer, homeowner, and household financial manager, as well as abandoning his responsibilities as a husband). The situation I'm in is not one I ever agreed to bear on my own, but it is what it is now. So I've made peace with this outcome and I'm not looking for disagreement on that point.
So, short sale or foreclosure, if you know the end result will be bankruptcy either way? How to weigh the pros and cons?