Best bet to mitigate the possibility of being pursued at a later date for possible deficiencies or collections is to negotiate the sale of the property with your current lenders. Of course there is no guarantee that your lenders will allow the full release of liens without keeping the possibility of pursuing you later through collections (or for that matter for them to allow a short sale), especially with the trusteeâ€™s sales date scheduled only 3 weeks out, but most lenders would rather allow the sale if it makes sense then repossess your property through a costly foreclosure.
You are probably already aware of the risks associated with a foreclosure - the first lien holder may pursue you through collections for the difference between the outstanding loan balance plus all costs associated with the foreclosure and the final sales price of the property as an REO. And the junior lien holder, whom will be wiped out through the foreclosure, may come after you for a deficiency judgment. Also, both lenders will most likely send you a 1099C for cancellation and relief of debt which you may have to claim as income on your tax returns.
BUT, you could also be at risk for a â€œbuy and bailâ€ transaction. This occurs when a homeowner who is underwater purchases another home within his same neighborhood (open to opinion) and then allows his prior home to fall into foreclosure.
For these reasons I would definitely suggest that you seek legal counsel immediately, preferably a qualified attorney specializing in real estate and maybe even bankruptcy as well. But, at the same time it may be prudent to have a realtor start contacting your lenders in order to get your trusteeâ€™s sale date postponed if possible. Remember, realtors can get started quickly and at no cost (unlike attorneys, at least the good ones), and your realtor may also be able to refer you to a really good attorney at the same time they start assisting you with a short sale.
Good luck with your situation, there is a lot stacked against you at this point. Pick a realtor experienced in short sales and preferably one experienced with negotiating with your same lenders in particular. Get up to speed on your legal and tax liabilities right away for both a foreclosure and a short sale, as there will most likely be consequences associated with both. And if you build the right team of professionals (realtor, CPA, and attorney) working together, you may just avoid having to always â€œlook over your shoulder for the rest of your life.â€
Hope this helps!