I highly recommend talking with an attorney as well as your CPA for a matter like this. I work closely with a BK attorney for shortsale clients. The initial consultation is free with no obligation. He will give you a better perspective of your options. He will inform you so you can make a wise decision. I work with an attorney for matters like this so my clients get the best possible advice. Contact me, and I will forward the attorney's contact information.
File BK, you can live without a good credit score; Credit Card / debit card is easily obtained. In as little as 3 years you could apply for a new mortgage. Note, the Bk should stop the second from any deficiency recourse it might try later down the road.
This is my opinion only seek out a professional BK attorney and a cpa.
Please call me at 805-630-3323 so I can get started and help you make a decision.
Otherwise, with your current credit score, I don't see any material difference between a short sale or BK for you. You can verify with a credit counselor on that. Here's my take. With a short sale, you may be able to recover and be able to qualify for a mortgage in 5 years. With a BK, you're out of luck for at least 7 years. So, with your current life plans, both would be poor options.
Realistically, your best bet is to continue to stay current on your payments and hope the current housing rebound lifts you out of trouble in another year or so.
You just cant BK a house.
If you go BK this does not do a whole lot for you with regards to the home.
Generally speaking you can buy a home 2 years after a BK. Here again this is not about a Bk is it?
It is about foreclosure or short sale.
You will probably not be able to purchase a home within 3 years if you short sell.
You probably wont be able to purchase a home for 5-7 years if you foreclose.
Now then a possible option MAY BE that some have been able to completely get rid of a second mortgage in a BK. Not always but some times. Here again it also depends on the type of loan who holds the loan ect.
If you do go BK you will need to reestablish a few lines of credit to be able to purchase a home.
As I see it your home is upside down by around 10%. Is it an option to keep your home?
In addition you will definitely need to raise your credit score at some point.
There are also rules about short sale, foreclosure, with regards to taxes and primary residence etc.
the list of items to consider is endless and there is no simple answer and in fact come 2013 the rules change yet again. It is my opinion that for the last 4 years we had some irresponsible rules and they all end soon. You probably could not if you wanted to short sell or foreclose in time and may incur some very serious tax penalties. I would not take the question lightly. You should consult a CPA. From what little I see from you wrote, My suggestion would be to keep the home you have and hang in there. Housing is already on the rise. Hopefully by the end of 2013 you may even be at a break even point. Start getting your credit in order. soon you will have a wife and child. Be responsible and and set an example.
Find a way to cut our expenses. cut out the crap like cigarettes, starbucks, eating out, etc. make your own lunch get a room mate ( rent out a room ) to help with costs. Fix it.
Be determined the whole way.
Bankruptcy attorneys are notorious for saying the problem will go away wen it comes to homes only to be proven wrong time and time again. Leaving you holding the bag and having a crappy financial situation.
If it were me,... I would pay down the cards the 10k. I would live under 5k a month and pay the other 2k towards the cards each month taking 25 months and getting on top of it all. I have been in your situation and I did it time and time again. each time I learn to spend less on cards.
Harold Sharpe - Broker
So Cal Homes
California Department of Real Estate Broker License # 01312992