File for bankruptcy vs. allow foreclosure?

[Help!]

We filed for Ch. 7 bankruptcy but our hearing was continued. I really, really, really don't want to go this route and it is likely to become a Ch. 13 because of our income. After weighing the pros and cons, I've realized that if we allowed foreclosure of the home we no longer live in and paid a lease return fee on our vehicle we would be able to pay down our unsecured debt on a debt management program.

The worst case scenario here is that the bank forecloses and we're on the hook for a gap between what we owe and what it's worth (I think the house is worth approximately what we owe). If that did happen, would they insist on a lump sum payment for the difference? If we didn't have that money, couldn't we then file bankruptcy as a last resort?

I know there are many of you out there that know the ins and outs of both bankruptcy and foreclosure, so if you can offer advice thanks in advance!

[lrprn]

Here's the flaw in your reasoning. Since you've already filed Ch 7, you can't just walk away from it like you never filed. Your trustee has to initiate the dismissal - there is no voluntary dismissal in Ch 7 like there is in Ch 13. And no matter what happens, the bankruptcy will stay on your credit record for 10 years even if it's dismissed. If after your Ch 7 is dismissed (if it can be) then you foreclose on the house, you now have two major credit negatives to deal with for many years to come.

If knowing this you still want to pursue the possibility of foreclosure, then check out these online resources that discuss the pros and cons of foreclosure vs. bankruptcy (Note: the contact information included on some of the webpages is *not* endorsed by BK Forum):

http://www.mortgagenewsdaily.com/wiki/Bankruptcy_vs_Foreclosure.asp

http://ezinearticles.com/?Bankruptcy-vs-Foreclosure&id=1049811

http://www.lawguru.com/cgi/bbs/message.php?i=685380794&view=a

http://en.allexperts.com/q/Creditors-Bankruptcy-Q-1086/foreclosure-versus-babkruptcy.htm

http://www.msnbc.msn.com/id/21478416/

These will give you a good sense of the pros and cons of each option.

And if you filed your Ch 7 with a lawyer, be sure to discuss your thoughts with him/her before doing anything. And if you filed on your own, I suggest making free or low-cost appointments with 2-3 local bankruptcy lawyers to find out what the repercussions of attempting to dismiss your Ch 7 case could be.

[Help!]

Thanks lrprn for the reply. Still mulling it over, although we did file a motion for dismissal with the help (?) of our incompetent attorney. We don't meet the means test (not by a long shot!), despite what we were told by this attorney. Our case was well on its way to being dismissed before we even set foot into the 341 hearing. We never should have filed, but it does no good to beat ourselves up over a decision we made based on faulty advice. If the mortgage company will take a deed in lieu we may be able to avoid a 13. If they do not, or they foreclose and pursue a deficiency judgment we'll be starting from scratch and filing 13 (with a real attorney, not someone who stayed at a Holiday Inn Express).