Legal Question in Bankruptcy in Michigan

The completion of your Chapter 13 case will give you a discharge, freeing you of any obligation on the mortgage, which is the common reason one might do a short sale.

You remain exposed to being sued as owner if someone gets hurt on your property until the foreclosure is completed. A surrender does not end your ownership; only the foreclosure does. This means that you must maintain insurance until the foreclosure is complete.

A short sale also ends your ownership. For this reason alone, the end of ownership and the end of a need to have insurance in case someone gets hurt on your property, I'd recommend doing the short sale. But, heck, most short sales don't go through so you'd better maintain the insurance until you the short sale or foreclosure is completed.