Is Offering the Bank a Short Payoff a Viable Option in Foreclosure?

The short answer is MAYBE.  Such a request is not unreasonable as you are basically attempting to avoid a deficiency by prepaying monies to the lender and avoiding the need for collection on their part. There are, however, assumptions with any short payoff.  For example, the lender will, most likely, still need to proceed through foreclosure to obtain a clean title.  The lender will also still need to insurance, maintain, and, ultimately, sell the property.  It is in such a context that your offer would need to be considered by the Bank and its attorneys. However, a more detailed review of your situation is needed.  This requires a consultation with an attorney versed in both foreclosure and bankruptcy. This is based on what appears to be a lack of personal assets.  Since retirement funds are exempt from creditors and protected in Bankruptcy, such a withdrawal to merely avoid foreclosure should not be undertaken lightly.  A complete review of your financial situation may result in the conclusion that a Bankruptcy that will protect your retirement, avoid any potential deficiency on the house and allow you to continue to reside in the property through to the conclusion of the foreclosure may be your best personal option. Additionally, if the property goes through foreclosure and a deficiency results, the amount of the resulting deficiency judgment to you may not be the actual difference between the monies owed and the sale price of the property.  A Judge has discretion in such matters and may not allow the entire deficiency to be entered against you.  Finally, the Bank, when faced with a potential Bankruptcy, may also review its position on sale proceeds.  The result may be an acceptance of the sale in satisfaction of the debt or a much lower contribution that you would make to avoid having to file for Bankruptcy. With these various options being potentially available to you, the best suggestion is for you to take a long hard look at your personal finances - income, expenses, and debts - and to gather that information for a consultation with an attorney before you decide to place your long-term future at risk via any withdrawal of retirement funds. This will provide context for a true and personal risk assessment involving both foreclosure and bankruptcy.  This will, in turn, provide you with a clearer picture regarding any short sale or buy-out option.