1) A bank is not obligated to modify a loan--it is voluntary. There means there is no liability against the bank for not modifying it.2) Banks don't have to approve short sales and do not have to explain why they disapprove them; again, whether to allow a short sale, and let a home owner avoid paying the full amount of their debt, is completely voluntary for the bank.3) Whether or not you were in discussions with the bank about modifying the loan (or about a short sale), if you were not making your mortgage payments in full, on time, you were in default of you obligations--and the bank could foreclose.4) Sometimes, if the loan *truly* was predatory--which generally means at an unconsiounably high rate and/or completely not suitable for the borrowers--it may be possible to rescind the loan; it is also sometimes possible to rescind it for a lack of proper disclosures. These are things you should discuss with an attorney in depth, bringing copies of all paperwork with you. Note though that being an 80/20 loan does not by itself make it predatory--very few loans actually are considered predatory even if, in retrospect, they were a very bad idea for the borrower.Another problem is, the courts sometimes hold that to rescind, you have to return the loan principal to the bank--which may not be something you can do. It's stiill worth discussing with a lawyer, however.5) Bankruptcy can delay foreclosure, but will not stop it indefinitely unless you can resume making payments and pay off the back arrears. It will protect you from being sued by the bank for any unpaid balance.