My husband and I filed bankruptcy last October and it was discharged in February 06. At the time we filed, we were led to believe by our mortgage company that as soon as all of our other debts were off the table we would be able to refinance our house to lower our payments and get out of the adjustable rate mortgage that we were in. Well, after all was said and done they won't nor will anyone else because the housing values in our area have decreased and we don't have enough equity. As a result, our mortgage payment was raised and raised and we are in the foreclosure process.

We never signed anything reaffirming the debt during the bankruptcy - but it was paid current at the time of the bankruptcy hearing. No payments have been made since. We are working with the lender on a possible short sale, but have not had any offers and the foreclosure sale date is Aug 23rd. My question is -- if it does foreclose and not sell, would we be liable for the difference between the full payoff amount and the sale price? Or does the bankruptcy protect us from that?

Any help is appreciated. This has been a source of losing a lot of sleep.

Thank you!!