Phoenix homeowners facing foreclosure are often considering personal bankruptcy as well. Is there a difference between letting the home go into foreclosure versus doing a short sale, even if you’re electing to file bankruptcy anyway? Does it really matter? Absolutely! What it boils down to is this: if we can get a short sale pushed through instead of the foreclosure, you would benefit from a reduced waiting period to purchase a home again, even with declaring bankruptcy.
The waiting period to buy again after a Chapter 7 or 11 bankruptcy is usually 2 years after the discharge and the wait after a Chapter 13 bankruptcy is 2 years from the date of discharge. The waiting period to buy again after a foreclosure can be up to 7 years. So a borrower can purchase a home again in as little as 2 years with a combination of bankruptcy and short sale on their credit, versus waiting up to 7 years with a bankruptcy and foreclosure.
One other consideration supporting a short sale is privacy. Although a bankruptcy is public record, it is pretty hard to find someone’s bankruptcy filing without pulling a credit report. By contrast, it is very easy to determine whether one has been foreclosed upon because the foreclosure is recorded in the official records of the county where the property is located. If we short sale the property before the lender completes the foreclosure process, we avoid having this document ever being recorded.
Your best plan of action is to consult with an Arizona bankruptcy attorney. The preceding is not intended to be taken as replacement for legal advice. They are my professional opinions drawn from my experience with real estate clients.
