Here is my understanding (hope to have constructive input from everyone.)
Except in non-deficiency states, the potential for a deficiency judgement always exists unless the Lender waives its rights to pursue.
Foreclosure never elimiates the potential for deficiency judgements (except in non-deficiency states). However, the foreclosure process totally eliminates and possibility of negotiating "out" the potential for a deficiency judgement.
Bankruptcy: the only sure-fire way to end the potential for a deficiency judgement, at any time.
Bankruptcy is the silver bullett that can vanquish a lender seeking a deficiency judgement. For the homeowner, it is the magic lever.
Deed-In-Lieu does not and must be specifically stated in the agreement. But the FICO damage is the same as a foreclosure. Why would someone do this???
So isn't the obvious conclusion that a short sale offers the best possible transaction for eliminating a lender's future claim to a deficiency judgement. If the deficiency judgement language can't be eliminated or waived, one always has the fall-back to bankruptcy to end the claim forever.
Why pull the Bankruptcy trigger too soon!