Do you even have to file bankruptcy if you have a foreclosure? Maybe I’m wrong what’s to keep you from handing the house back to the bank? If it sells for less then you owe then 1 you would end up with a house payment on a home you don’t own any more. Sad but again this happed to a good friend of mine out in Temecula. Or 2 if it is a large enough debt the bank will realize it will force you into bankruptcy and they will probably never see a cent of the money so they will write the debt off and move on. Sure you will get taxed on that as income. Will that change with the new bankruptcy laws? If it doesn’t then as long as you go into foreclosure early there is no reason to not walk away at the first sign of trouble. Foreclosures stay on your record for about 7 years so if you walk out in the first years of the down turn you should be ready to get back in as the market is turning around. I don’t see the problem.