My house cost $400,00 but now it is worth only $200,000. I had a loan and mortgage for the house.

If you sell the home, you have to sell it for the full balance owed or get the bank to agree to a short sale. The decision to file a bankruptcy should only be made after a thorough consultation concerning your entire financial situation.

The available options for your situation will vary by state, because the first issue is to examine what rights you have understate law. You should consult an attorney experience in real estate, foreclosure, collections or bankruptcy in your jurisdiction. I am not clear if you have a total of 2 loans against the property?. What you need to know. Does the state where the property is located permit an action/suit for a deficiency if the property is sold at foreclosure for less than what is owed? Is there a limited time frame for the lender to file suit on the deficiency? If the first position mortgage/lender is the one doing the foreclosure they might not pursue any deficiency. If the time limit for the 1st position lender to file a complaint/suit is short you may be able to wait it out. However, if you have a 2nd position lender, they may have a substantially longer time frame in which to file suit and you will most likely still owe them following any foreclosure. You may be able to do a short sale where both lenders agree to release the property even though they have not been paid in full. This may have less of an impact on your credit, especially for future mortgage financing. However, you need to understand whether or not you will be liable to either lender for any deficiency following the sale. Some states have laws limiting a lender's rights to pursue a deficiency if they agree to a short sale. Once you have gotten answers relevant to your jurisdiction on the above issues, if you expect to still owe a significant amount you should certainly consult with an experienced bankruptcy attorney. Even if the creditors don't pursue their claims immediately, it may be better to file bk now and clean this up then to have it hang over you and coming up several years latter.

As stated you are required to obtain the full amt owed to the mortgage company or have them agree to a short sale. Bankruptcy is one way to go if no short sale can be worked out but know that will stay on your financial record for a long time

In North Carolina there are typically four options available for homeowners in your situation; loan modification, short sale, deed in lieu, and foreclosure. Loan modification would allow you to restructure your mortgage payments and remain in the property, whereas the later options would not. If you cannot afford to make payments and remain in the home short sale should be your first consideration. This requires a hardship: reduction in income, relocation, or illness, for example. In order to pursue a short sale you would need to list your property with a real estate agent and obtain an offer. A bank's stance regarding the deficiency (the difference between what you owe and what the bank receives at closing) will vary depending on the bank; larger lenders like Bank of America or Wells Fargo typically forgive the deficient balance, whereas smaller lenders often request a promissory note or a cash contribution. If you file bankruptcy the bank will still likely foreclose on the property. Your situation is not unusual and there are options available to help avoid foreclosure. To explore all available options I would suggest contacting an experienced real estate attorney. Best regards, Justin Palu