After a short sale, you can start to rebuild your credit immediately by paying all other bills on time. If this was your primary residence you will not have to pay back either the difference or taxes on the forgiven debt. It if was not, you may be responsible to pay the IRS for income tax on the difference between the sold amount and your mortgage. In a foreclosure, the recovery for your credit will be longer, 7+ years likely. The lender could seek a judgment for the difference if they decide to. If possible, a short sale is a much better option for the current and long term effects. I hope this is helpful and wish you lots of good luck. Why are you considering a bankruptcy? Do you have other large debts that you are unable to repay?