My Utah realtor says that bankruptcy will hurt my credit more than a short sale. Is he right?

Yes, he is.  Bankruptcy does awful things to your credit, and if there is a way to avoid bankruptcy by going through a short sale, then take the short sale.

However, the home is usually not your only debt.  If you are still going to have to go bankrupt even with the short sale, then go bankrupt first.

If you file bankruptcy first, then your credit will only reflect the bankruptcy.  Under the FDCPA (“Fair Debt Collection Practices Act”) combined with the eventual bankruptcy discharge, a creditor cannot report negative items on your credit that occur after the bankruptcy has been filed.  So if you have a choice between short sale then bankruptcy, or bankruptcy then short sale, go with the bankruptcy first, and you’ll only take one hit on your credit.

This will be a hard sale with your realtor, because he wants the commission from the sale now, but tell him not to worry:  you can still proceed with a short sale even in an open bankruptcy case.

This is not legal advice.  If you need legal help, go to


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