When you are in default or in the verge of default in paying your mortgage, you have two options to choose from: foreclosure or short sale. In some places within California there are two types of foreclosures, judicial foreclosure and non-judicial foreclosure.

For best results, I suggest that you consult a real estate lawyer or a tax accountant before making any important financial decisions. But to get you started, let me give you some idea about foreclosure short sale.

You and your lender can agree to a short sale when the value of your house or property is less than your debt. For example if Luke has a $200,000 mortgage but his house is only worth $100,000 based on current market value, then he's qualified for a short sale. Short selling will not earn you any money or equity. In fact all the proceeds of the sale will be used to pay for your debt.

Aside from short sales you can also opt to a foreclosure. As I said earlier there are two kinds of foreclosures, judicial and non-judicial foreclosure. Let's discuss non-judicial foreclosure first. With non-judicial foreclosure your lender (most likely your lender's agents) will act as a trustee and sell your house in a privately run auction. In essence you'll be selling a deed of trust so this process will not involve the court in any way.

Without court intervention and finality, going for short sales or non-judicial foreclosures opens you up to personal liability. This means that your lender will have no prohibition to go after your remaining assets (like a second house or property) in order for you to satisfy your debt.

So if you want to protect your remaining assets just go for a regular judicial foreclosure. All you have to do is remain in default and the court will handle all the legalities for the expedient public selling of your house.

The big down side of a Judicial foreclosure is that it can take longer than a short sale or a non-judicial foreclosure. It's also a very complex and expensive proceeding than any of the two. But if you have a second house or any remaining asset, you can protect it from your lenders only by going through judicial foreclosure.

I have tons more of information about foreclosure short sale. Just sign up for my newsletter and you'll get to download my exclusive 25 page report with the inside scoop about short selling. You can also get my in-depth how-to video about short selling and how you can protect your credit.