More and more, homeowners are looking for ways to get out from under mortgages that are secured by homes that are worth far less than they owe to the bank. Some are simply walking away from their homes and letting the banks foreclose. Others are trying to sell their home by short sale. Whether you walk away from your mortgage or get the bank to agree to a short sale, you need to think about the consequences.

By definition, a short sale will result in a deficiency in the amount you owe the lender after you sell your home. What that means is that even though you've sold your home, the lender didn't get back all of the money it lent for the home. You can be sure that the bank will want to get that money back, and the first place it's going to look is you.

Of course, if you were struggling with making your mortgage payments, it's probably not going to be any easier to pay off that deficiency. Your first strategy should be to get the bank to agree not to come after you for the shortfall. It's impossible to know whether the bank will agree. Different banks have different policies, and whether they agree might just be a matter of timing. As my mother used to say, "you won't know if you don't ask."

If you don't come to an agreement as to repayment of the deficiency, there's a good chance the lender will sue you to recover this money. If they get judgment (and they probably will), the lender can garnish your paycheck and your bank accounts. In Colorado, they can have 25% of your take home pay until the full amount is paid off.

There is another alternative: bankruptcy. Bankruptcy will eliminate any legal obligation you have to pay the deficiency. When you file bankruptcy, the bank can no longer pursue you for the money it lost in the short sale. Bankruptcy will also eliminate (or discharge) other common debts, such as credit cards and medical bills.

Finally, you don't have to wait to file bankruptcy until after your short sale. This might be a good option especially if you have other creditors breathing down your neck. Even if you file before your short sale is done, the bankruptcy will discharge your deficiency.

If you have been through a short sale or are considering one, talk to a Denver Bankruptcy Lawyer to see how bankruptcy can help you.