Here is a question asked on AVVO.com:

Is it better to file a bankruptcy than to have a foreclosure? We bought two houses, one a residential and one was made commercial (for rental purposes) but the second one needed a total renovation and since finances were a big problem nowadays, we can’t continue to pay it. We’re already behind two months. Please advise if foreclosure is better or bankruptcy. thanks!

Here is my answer:

Whether bankruptcy or foreclosure is better depends on your whole financial situation. Regardless, allowing the property to be foreclosed upon doesn’t end the problem. That is because you still have liability on the property for any amount owed on the loan (deficiency) after the bank sells the house at the foreclosure sale. A bankruptcy would eliminate this deficiency. You could try to short sell the property also.

You do have several options, but you need to review everything with an experienced bankruptcy and foreclosure attorney to see what your best solution would be.

Here’s a link to a blog article I wrote on options after bankruptcy with a home: short sale or foreclosure:

http://www.bankruptcylawchicagoblog.com/which-i…

Daniel J. Winter
BankruptcyLawChicago.com
djw@dWinterLaw.com
312-789-9999

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