Ask Me Help Desk - Bankruptcy or foreclosure

Quote:

Originally Posted by tyshayky

I am in a bad situation with my home loan. I am negitive equity and have a negitive amoritization loan. Each month my I owe more on my loan. I already owe 50,000 more than I bought it for. I can barely afford the payments I am making now and the taxes are killing me. My husband works two jobs and we have NO MONEY!
We dont want to be in this situation any more, it was a huge mistake for us to buy a house and we just want OUT.
We can't sell because the market is down and we owe more that the house is worth.
My question: Should we just walk out now and let the foreclosure process begin, or file bankruptcy?

You have a couple of options. First, the bank doesn't want the house if they can avoid it.

Ask them, yes call them up, and see if they can work out a forbearance agreement that you can afford. Second, if you file Chapt 13 bankruptcy, your payment likely will be MORE than your regular payment. The intent is to pay the back payments over time. If you owe a LOT of debt beyond the house mortgage, you may want to consider a Chapt 7 and get a fresh start. Two years after the END of the bankruptcy (Chapter 13 is usually 3 years long and Chapt 7 a couple of months) you will most likely qualify for another mortgage.

Be careful of the tax implications. The IRS usually views a debt write off as taxable.

You can try selling by Owner and save the Real Estate fees. The bank MAY allow you to sell the house for the amount owed if you have a bonified buyer.

You may want to just "walk away" and wait a couple of years to try to buy a house again. The form you filled out to get the mortgage probably asked if you ever lost a house to foreclosure. When you apply next, that same question will be asked. It is the worst possible thing to have on a mortgage application. No lender wants to get involved with someone who "walked away" from their mortgage, but it still is a lot better than spending the next 5 years under the strain of an unmanageable mortgage. Your family is too important to fall into that trap.

The next house could be purchased from the owner "on contract" EVEN IF you have any of the previous conditions, It just takes effort to find the right situation.

Remember, life doesn't stop just because we have a few "set backs" along the way. Edison "discoverd" 10,000 ways that a light bulb WOULDN'T work before he found one that did.