Whether or not a short sale is the right way to handle your mortgage crisis depends on a number of factors. To understand whether it might be the right step for you, you first have to understand what exactly a short sale is.
A short sale means that a property is sold for less than is owed on any related mortgage. For example, if someone owed $180,000 still on a mortgage balance and they were able to come to an agreement with a buyer to sell the property for $170,000, that would be a short sale. There would be a loss to someone -- often the bank -- of $10,000.
Because the bank is often the one to take the loss, they have to agree to a short sale. It might seem unlikely that a bank would agree to let you sell your home for less than you owe on it without making up the difference to them, but it can be in the interest of the bank to do so in certain situations. If you can show a financial hardship, then the bank will often work with you on a short sale because the option for them might be you foreclosing on the property. In the case of a foreclosure, the bank spends more money in legal fees and usually ends up having to sell the property itself -- often for a loss equal to or more than what might occur in a short sale.
A short sale is not the same thing as a foreclosure, and it doesn't come with all the same disadvantages to credit that a foreclosure does. It's not a perfect solution for a homeowner, but it might be a way for you to get out from under an oppressive mortgage.
If you want to keep your home, you do have some options. Talk to a bankruptcy attorney to understand those options and how you can manage your debt crisis to ensure a more stable future.
Source: Zing! by Quicken Loans, "What’s a Short Sale? The Short Sale Process Explained Read," Gabriela Islas, accessed March 24, 2017