Home > Mortgages > Underwater On Your Home Option 5: Walk Away / Foreclosure

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In this series, Underwater on Your Home?, I describe six possible options available to you if you are underwater on your home. This is part five of the series.

Option #5: Walk Away / Foreclosure

One in every 605 homes received a foreclosure filing notice in May 2011, says RealtyTrac. In some cases, homeowners struggle until the very end to catch up on their mortgage payments and save their homes. But others just walk away.

About six months into his newly modified loan, Javier Gonzales (whose story begins in the part one of this series) started falling behind on his payments again. He was trying to modify the other loan without success, and credit card debt had started to pile up as well. He realized he was in a losing battle. Surfing the Internet, he came across a website called YouWalkAway.com. He used their interactive calculator designed to help homeowners evaluate whether it makes financial sense to walk away from their home and rent instead. “At that point the home (value) had gone down to half of what I owe,” he discovered.” In 15 years I would be even at equity and in the process I would pay $1.1 million. So I just stopped paying.”

Though the term “strategic default” is often used to describe homeowners who stop paying in a mortgage when they can afford to continue making payments, it can be misleading. Jon Maddux, CEO of YouWalkAway.com, says that many homeowners have exhausted other options by the time they think about walking away. It’s not an easy decision for most of them. But the question he says needs to be asked is “whether having the title ‘homeowner’ is worth paying good money after bad for the next ten to fifteen years.”

Walking away from a home may not always be as simple as it sounds. There may be financial, legal and tax implications. In most states it takes time for lenders to foreclose, though, and that can be to the homeowner’s advantage. Lender Processing Services has found that over 33% of loans in foreclosure have not made a payment in over 2 years.

Maddux tells owners not to just pack up their bags and leave. “It’s important not to abandon the home,” he says. “Even if you abandon the home, it’s still your liability.” Homeowners who move out should make sure their insurance is updated to reflect the fact that it is vacant, for example. Homeowners should also consider keeping up with homeowner association dues or risk foreclosure by the HOA in some states.

“We advise them to stay in the house as long as they can until the property is transferred back to the lender or to the investor who bought the house. They need to hunker down and save money or perhaps pay off other debt.” Many of YouWalkAway.com’s clients leave their home with little or no debt outside the mortgage, and enough savings to rent a new place to live.

Legal Liability & Deficiency Judgments

Walking away from your home may not mean your problems are over, though. Depending on the type of loan and the laws of the state in which your home is located, you could be liable for the unpaid balance plus foreclosure costs. Very few lenders are suing on deficiencies, says Maddux. “We have over 6000 clients and we’ve only seen 15 – 20 deficiency judgments or lawsuits,” he notes.

But debt negotiation expert Charles Phelan warns that doesn’t mean the former homeowner is out of the woods. The statute of limitations can be several years in many states and he predicts that attempts to collect deficiency judgments will intensify as servicers and lenders start working through the backlog. He advises homeowners to put it behind them by settling their second mortgage for less than the full balance.

The lingering threat of a potential lawsuit is one reason why it’s a good idea for a homeowners to meet with a bankruptcy attorney if they’re thinking about letting a home go into foreclosure. Filing for bankruptcy may wipe out or reduce those balances. At a minimum, the attorney can explain what the lender can and cannot do to try to collect a deficiency.

Another good reason to consult a bankruptcy attorney? Taxes. You may owe taxes on part or all of the forgiven debt if you don’t quality for an exclusion such as the one offered under the Mortgage Forgiveness Debt Relief Act or because you are insolvent. Debt wiped out in bankruptcy is not taxed. Timing can be everything, however, so it’s a good idea to meet with a bankruptcy attorney before your home is foreclosed upon.

As far as your credit is concerned, foreclosures, short sales and bankruptcy are all very damaging. The impact they will have on your credit scores depends on how strong your scores were before you gave up your home. Over time, your credit will recover as long as you focus on building and maintaining positive credit references. Keep in mind, though, it may take longer to get certain types of mortgages after a foreclosure, short sale or strategic default.

In her book The Homeowner’s Guide to Surviving Foreclosure, attorney Teisha Powell urges homeowners to be proactive and seek out the help of an attorney who can help them negotiate away a deficiency or file for bankruptcy to eliminate that possibility. A judgment can be “a nightmare,” she writes. “I get a lot of calls from crying borrowers because their bank accounts are being seized to pay for the judgment.”

As for Gonzales, he says “I’m done.” The area where he is renting a home now is a little rough, but when someone asks him if he feels safe, he says absolutely. “I’m not scared of the neighborhood, but I am scared of these banks.”

Other options for homeowners with “underwater” mortgages:

  1. Underwater On Your Home Option 1: Stay and Pay
  2. Underwater On Your Home Option 2: Refinance
  3. Underwater On Your Home Option 3: Get a Loan Modification
  4. Underwater On Your Home Option 4: Short Sale
  5. Underwater On Your Home Option 5: Walk Away / Foreclosure
  6. Underwater On Your Home Option 6: Bankruptcy

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  • Carol

    Filed Chapter 7 bankruptcy in 2010. Wanted to sell house but found out it’s underwater. If I do a strategic default will I have any deficiencies or tax liability?

    • http://www.Credit.com/ Gerri Detweiler

      You may. The bankruptcy doesn’t protect you after the fact as far as I know. (Unless you didn’t reaffirm the loan, in which case you may be able to walk away.) It would be a good idea to discuss with your bankruptcy attorney.

      With regards to taxes, you need to determine whether you qualify for an exclusion: 1099-C In the Mail? How to Avoid Taxes on Cancelled Debt

  • Moving to Dream house

    I bought my condo 6 years ago for $119,000. I still owe about $100,000 on it. In the last couple of years many foreclosures in the neighborhood and changes in the neighborhood have been happening. Right now my condo is worth about $46,000. I want out. The neighborhood has gotten to the point that I don’t feel safe. I am in the process of buying a home that was foreclosed on in a different neighborhood. I just don’t know what I can do with my condo. I am going to try to rent it but if I can’t I was thinking of walking away from it. What will my options be because I will be owning a different property.

    • http://www.Credit.com/ Gerri Detweiler

      Before you do anything I would encourage you to get some professional advice. You are talking about walking away from a substantial debt which can leave you a. open to a lawsuit for the deficiency and/or b. on the hook for taxes if a 1099-C is issued. In the case of the latter, if the home is your primary residence then you may qualify for the Mortgage Forgiveness Debt Relief Act exclusion but if it is a rental it may be treated differently. It’s wise to get advice before you make a move that you can’t undo. I’d recommend you talk with a consumer law attorney familiar with foreclosures and a tax professional who really understands 1099-cs to run these scenarios by them. (In an ideal world you’d find someone who knows both real estate and 1099-cs!)

  • Judy Sheahan

    OK I am looking at my options and need your advice My Husband and I bought our house 7 years ago, 3 years ago we modified our loan to try and lower our payment, it was $1584. (bought our house for $200,000 right before the market droped and now our house is worth $107,000.) when we modified our payment only went down $50. and all our equity was gone. Every year since then at the end of the year we get a notice that our escrow is short and we can either pay a bulk amount or our mortgage will increase. We have never been able to afford the bulk payment so every year our mortgage has when up. Now our mortgage is going up again due to the shortage in escrow to $1684. we are so up side down, have no equity and house is worth half what we owe…..what should we do can’t afford this new rate.

    • http://www.Credit.com/ Gerri Detweiler

      First, your escrow is based on taxes and insurance. Have you ever shopped around for lower cost homeowners insurance? Have you tried to appeal your property tax assessment? It’s very possible it is too high and you can save money by getting it lowered.

      If you aren’t successful and still can’t afford it I recommend you talk with a consumer bankruptcy attorney who can help you understand your options for this loan.

  • Stacey Doneff

    I just learned my landlord has not paid her mortgage in over 2yrs. and has been denied a loan modification the house has had several auction but i learned they came and went for some reason .she says she hired a lawyer and wants me to help pay him to save her house.I find this hard to believe it can be saved.Am I wrong to move out rather than just wait for a vacate or or auction sale without notice thank you Stacey.

    • http://www.Credit.com/ Gerri Detweiler

      First of all, I would not recommend you pay her money to try to save her house. You need to save your money for your move. However, I don’t know exactly how this affects your lease. So before you do anything, find out what the landlord-tenant laws in your state say about these situations. That make sure you follow the proper procedures before you move out. This may help: state landlord tenant laws

  • http://www.Credit.com/ Gerri Detweiler

    If you are seriously thinking about letting it go into foreclosures please meet with a bankruptcy attorney. The attorney should be able to help you minimize the damage and avoid a situation where you owe taxes on “cancelled” debt. The last thing you need is for this to create problems for you years from now.

  • jeepwrangler

    dear gerri i was willed an underwater 4 months behind pmt loan what are my options. would like to stay but cannot pay the 1900 plus.11 month temp re-payment plan but can pay 1300 reg pmt chase is
    the lender. and says if broken the re-payment will be higher.no other assest in will.wainting and i will submit will in jan 2014 ps i keep up property mow lawn/repairs.and live in it now.under fathers note.property is in conn.

    • http://www.Credit.com/ Gerri Detweiler

      If you are behind on your payments and cannot afford to catch up then you must talk with a bankruptcy attorney. The attorney will be able to tell you whether you can use a Chapter 13 to keep your home and catch up on the payments that are behind. Please don’t put this off – it will only get worse. You can find a consumer bankruptcy attorney at Nacba.org.

      Fingers crossed for you!

  • roger

    I currently own a condo in California. My HOA has assessed me, wrongfully, with over $16,000 in fines, late fees and undocumented charges. My condo is uninhabitable due to serious damages caused by the leaking roof, and other issues. The unit is paid for in full. I also own another condo, also paid in full, which has been red tagged as uninhabitable. I have been thinking about filing bankruptcy in order to get out from under the HOA fees, but am concerned about the property and whether or not the Trustee will take it from me. Can you help with this?

    • http://www.Credit.com/ Gerri Detweiler

      Roger – You need to talk with a consumer bankruptcy attorney to find out what your rights are here. You can find one at NACBA.org.

  • Sarah Marek

    Hi! My husband and I bought our first home 5 years ago for 95k. In the five years, we have done so many updates and really cleaned up the place. We now have a 9 month old who is literally stuck in the corner in a pack-n-play, so we really would like to get out of this house. We recently put our house up for sale, and listed it at 105k, we owe about 97k. All of a sudden after listed for 3 weeks, our realtor says realistically, our house should be listed at 55k! There is no way we can make up the difference, and at the same time, we are desperate to get out of here! I have great credit, and my husband has near perfect credit, we have never missed a payment, but we are clueless as what we should do, or who to turn to!

    • Credit.com

      Sarah — Have you had the house appraised? I’d first find out what the home is truly worth. Unfortunately, you’re not alone. There are millions of homeowners who are underwater and stuck in homes that are worth half (or less) of what they were purchased for. You could short sell the home but that would impact your ability to purchase a new home if that’s your purpose for selling. There’s no easy solution here because your options are extremely limited but have you considered leasing the home that you’re currently in (renting it out)? You’d essentially have two homes, one that you reside in and a rental property .. and obviously, there are more complications to consider (managing the property,etc.) if you go that route but the alternative is to remain in the home until it appreciates enough to sell it for the amount you owe on your mortgage (which may be never). Another problem you’re going to face in the rental scenario is that most mortgage lenders require a tenant to be in the home for a minimum of two years, or to show a two year lease agreement before they’ll count the rental as income. Otherwise, the rental property will be included in your debt to income calculation, which could impact your ability to qualify for a mortgage on a second home.

  • Outgrown Our Home

    We bought our home 13 years ago and made some mistakes along the way. Refinancing with a private mortgage company in 2006 being one of them – now we do not qualify for any of the assistance programs. Home is worth about 55000 and we owe about 80000. Can’t get a modification, can’t refinance to lower interest rate, can’t short sale because “default is not imminent”. We would really need to move because it is a 2 bedroom home and we have 2 children, 1 boy and 1 girl between 8 and 12 years old. My wife and I have been camping out in the living room in order to allow them to have their own rooms. We don’t necessarily need a more expensive home, just one with a little more space. Suggestions?

    • Liz

      Rent out your home if you can

  • Dennis Skiles

    After getting discharged from a BK my wife was out of work do to medical problems i called mu home loan place and they told me that they could not talk to me because i was in BK status 11 months later they call and tell me i am behind 9 months i advised them i needed to apply for a modified loan i fill out paper work and i am deined and now 13 months behind do to they told me not to send any money now i am in forclosur what do i do i am sendins in more paperwork ever day

    • Gerri Detweiler

      Dennis – Did you file for bankruptcy with the help of an attorney? If so that attorney should be able to help you work with the lender or refer you to someone who can. If you filed on your own, then I would recommend you consult a bankruptcy attorney and ask for help trying to get your loan modified. The lender may not be obligated to modify your loan but hopefully if you get the right kind of help you can work something out.

  • Stressed out

    Ok so we bought our house with an FHA loan 6 years ago for 304,000. 00 now we get a letter in mail saying property is only worth 190,000.00 and we still owe 278,000 on the house. We had a smell in the house and had to call in a plumber and we have major leak under house not sure if its sewage or water yet but thinking sewage. We also have a leak in our roof . The roof is in desperate need to be redone. So I have not missed a single mortgage payment or even been late for that matter . I do not have money for repairs at this point and with our credit scores being low due to falling behind on credit cards when hours were cut at work. Which are all back now but I’m just now going to be all caught up this month. Any suggestions on what we should do. I hate to walk away from our home but if we can’t pay for repairs that have to be made for safety to live here I can’t see any other choice . Thanks

    • Gerri Detweiler

      I can understand why you are stressed out. Unfortunately I don’t have a simple solution for you. If you can’t afford the required repairs then you really can’t afford the house. You may need to consider trying to sell it in a short sale. I’d recommend you get some professional advice about your situation. I wrote about that in this article: Underwater Homeowners Ask: Should I Stay or Should I Go?

    • A

      I have the exact same thing going on. Upside down on 9 yr old duplex.
      purchased new in 07. I have renters in there and just refinanced. Have a leak in master that has been going on for a while and there thinking mold. A ton of expense i don’t have.I need help as to what to do with tenants,repair,bad economy.

  • Nancy Buchman

    I bought my condo in 2007 when the market was crashing. I had it built brand new (Pulte Holmes). I watched as the builders continued to sell condos for 50K to 80K less than what I paid. I was beyond frustrated and sucked it up hoping as years go by that market would improve and I would eventually get equity in my home.

    I got married in 2010 and found a new job near about 2 hours from my condo to be near my husband, I could not sell my condo because the value had not increased, so I ended up having to continue to pay for my mortgage and bills at my new residences with my husband. It was killing us financially.

    Then I lost my job due to funding, and I was out of work for 3 months and got behind on my mortgage in 2011, I have Wells fargo for my lender and they so called “helped me” and worked out a deal for me to pay back $3100 per month after I’d found a new job. I struggled and paid back this money and my HOA dues were behind which is over $300 per month, I had to borrow money from my inlaws to catch up.

    All this caused depression to set in, I orginially purchased my home in 2007 for $309,400. I had a real estate agent recently tell me that the market value of my condo is about $280K, I owe Wells Fargo $300,000 (my mortgage balance).

    I called and asked to do a short sale on the property and I’ve found a real estate agent, she promised me that she could sell my home quickly with a Short Sale, but she says it may take about 3-4 months before I could close.

    I got sick in October 2012 and had surgery and lost my job, I did not make a mortgate payment in 3 months again, Now I am behind a few mortgate payments and owe $8800 dollars in back mortgate payments to Wells Fargo.

    I found a new job after my losing my job and started in January, but I feel I am too far behind to catch up again. My new job requires a security clearance and I fear that I will lose my new job if I go through a short sale which my real estate agen has advised me NOT to many any more payments.

    I feel like I am up against a wall and I can no longer think straight with all the stress, I can’t sell my condo because it is still under water after 6 1/2 years of making mortgate payments and if I allow the Short Sale to take place which I have a FHA loan which will
    It is now 2013, and I’ve had many stressfull illnesses and surgery all due to my home being upside down.

    My home is a FHA loan which will make the process even longer to go through a Short Sale and I can’t allow my credit to further take a hit with my upcoming security clearance and the agent is advising me to NOT make payments.

    I am seriously thinking of just filing bankrupcty and quiting my job and letting the home go into foreclosure.

    Can you give me some advice,


    Heart broken.

  • Beej

    I’m in the military and we bought a house in 2009 for $156k. We’re being moved and now houses the same size in my neigborhood are listing for $118 and not selling. Both real estate agents we have talked to told us to just rent it out. Is there a way to get into a new home/mortgage in our new location and just let this one go? Apparently there was a government program to help service members in this situation but it has ended. I just don’t want to deal with a rental property until the value returns and then try to fix it up to sell it. I’m almost considering hiring a group of careless smokers to have some “accidents”: How can I walk away from this place?

  • Jean

    My husband and I purchased our home in 2007 and the mortgage broker tagged on an FHA/HUD insurance we didn’t give it much thought. From the beginning we realized we were misled by the sellers and realtor. The oil tank which was built inside the basement leaked oil so bad we had to have it removed so we have used firewood to heat the home, the easement was laid out as we had control over it with the neighbors using it occassionally to access the back of the property….they park on it, they tell our kids they can’t play on it and recently threatened to have us towed off our property…the legal battle is not worth the money and stress. The deck was not built properly so when it rains, water leaks into the basement through the outer house walls we were not advised of this, the electrical is so bad several outlets have caught fire inside the walls and an electrician said the only way to fix it is to gut the plaster walls. Our new roof wasn’t vented properly and caused the attic to have mold and neither the roofing company nor our insurance company will fix it so now we have mold in the attic and a closet wall and just discovered it underneath a bathroom sink as well. The purchase price was $150 and we have modified twice so now 7 years later actually owe more. Homes in our area larger than ours are selling at $80K and below. We can afford the payments but not the repairs. We are moving out.
    Contacted WF about a deed in lieu but they said we have to do a short sale first. I can’t conscientiously rent it for fear it will burn with someone inside. We are cleaning it, painting the walls and making little repairs and just want to give the keys back. Are we required to do a short sale? WF says we have to for 6 months which would be extremely tight for us after 6 months what happens? My health has been adversely affected by the stress in this home and my children have developed allergies due to the mold!

    • Gerri Detweiler


      It really does sound like an incredibly stressful situation. If I were in your shoes, I would make an appointment asap to sit down with a consumer bankruptcy attorney to understand my rights and responsibilities in this situation. It is risky to move out without a plan; you may still be liable if something happens on the property while it is sitting vacant. So you want to make sure you protect yourself here. You can find a consumer bankruptcy attorney at nacba.org.

    • Gerri Detweiler

      Jean – I suggest you do two things:

      1. Talk with a real estate professional who does a lot of short sales. Short sales don’t have to take 6 months if the lender cooperates. The real estate agent can give you a more realistic view of what your home is likely to bring in a short sale, and if necessary, negotiate with the lender.

      2. See a bankruptcy attorney with experience in real estate matters to find out whether you can unload the house and discharge any deficiency in bankruptcy. A short sale is better for the lender as they want to minimize their costs and don’t want to have to worry about unloading the house themselves for less money but it may not be best for you. Bankruptcy may allow you to put this nightmare behind you.

      Good luck with your situation.

  • Becky

    My husband and i are divorcing. The prenup states we have to sell the home. We owe 175K (3 year old house bought brand new) and comparables in the area are selling for 140K. To make matters worse, the ex did quite a bit of damage to the home when he moved out. (Took the refrigerator, smashed the thermostat and cut the power to the garage door opener to name a few.) In all, cosmetic damage is only around $700 minus the thermostat, but overall total damage rendered the house uninhabitable. (around $2000 to put it all back the way it was). At this point, I don’t want to make anything easier on the ex, but I can’t afford to deal with the entire deficiency on my own. Do I file before the divorce or after. Do I have to file with him if we are still married? This is just beyond complicated…oh, and I’ve had to put a protection order against him, so there is to be no contact between us.

    • http://www.credit.com Gerri

      Becky – Sorry to hear what you are dealing with. I can’t answer your legal questions – you’re going to have to talk with your divorce attorney and possibly a real estate or bankruptcy attorney about the implications of trying to sell the house before or after the divorce. But a few things to keep in mind:

      1. If you both signed for the loan to buy the home then you are both fully responsible for the debt, regardless of what the prenup or divorce decree says. That generally means the lender can come after one or both of you for the entire deficiency.

      2. You may be able to file for bankruptcy on your own (even if you are still married), and that may protect you from being pursued for a deficiency. A bankruptcy attorney can advise you there.

      3. You may want to consider a short sale if the lender will agree to forgive any deficiency. But if that happens it’s possible you may receive a 1099-C for the cancelled debt.

      Your next step should be to get legal advice to walk you through your options. As you point out, it is complicated. Hang in there.

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  • ED B.

    My wife and I are falling through the cracks of the system. Here’s the story so far… we bought our home before the recession, due to our loan type we needed a home inspection, which we were going to do anyway. The inspector indicated that the basement had flooded before but it seemed to be a rare occurrence, well it wasn’t and to make matters worse the city redid the streets drainage. Our lot is a corner lot and this city upgrade has the rain water draining into our yard. We have gone through the cities many avenues to show that it is causing major problem’s in proper drainage of our property they refuse any acknowledgment that it is partly there fault for our current predicament. There is mold throughout the house
    9mushrooms growing in the bathroom) we have been trying to repair the house but do not make enough to cover the costs and there growing. We have tried gov. help agencies but they say we make to much to qualify, we have tried the bank but they say we don’t have the equity and seeing how we have both been through a bankruptcy we can’t get a loan for repairs. We have never been late or behind on a payment we have struggled to stay in the black. This has been going on for over a year we don’t qualify for any help of any kind we keep getting turned away. We want out of this house we can’t afford the upkeep we owe 109,000 we can’t sell the house in the condition it is in. And yes we have house insurance but they say it’s owner neglect, we have flood insurance but FEMA tells us that the current situation started before we bought the house and the previous owner would have to make a claim. We have been trying so hard to be good homeowners but it seems in order for us to get help we would have to throw it all away and start over again. PLEASE any advice would help what our are options how can we get out from under this without losing everything??

    • Gerri Detweiler


      I wish I had an easy answer for you. Unfortunately, I don’t. My guess is you won’t get anywhere with the bank; they aren’t going to lend more money on an already risky loan.

      I think one of the most important things to consider here is whether there are repairs that could be done that would fix the problem permanently or whether this home is just going to be an ongoing headache. If it can be fixed, and you can’t afford to make them then you either have to find out if there is a third party that is responsible who would have the financial ability to pay for those repairs.

      If you are just stuck between a rock and a hard place because you bought a house that’s turned out to be a lemon and there is no way to get the repairs done, then you have to figure out what your options are for getting out of the house. (Since this is a mold issue, it sounds like your health could be at risk.) You already filed for bankruptcy so I’d suggest you talk with your bankruptcy attorney to find out what the risks are if you try to walk away or do a deed-in-lieu of foreclosure.

      Have you talked with a real estate attorney to see if there is legal action to you can take? Is there some fault on the part of the inspector here? Did the former owners misrepresent the situation when they sold the home to you? If the problem really lies with the city then can you try to get some publicity for your plight through your local newspaper or television station to put some pressure on them to help with the cost of repairs?

      Maybe one one of our readers can offer suggestions as well.

  • Donna Moore

    We are over under on our home and my husband needs to retire. Right now he is making good money and we can afford our mortgage payment but when he retires in a few months we will not be able to pay this mortgage and the house will be too big for us to keep up. What is the right thing for us to do in this situation

    • Gerri Detweiler


      It sounds like you are not in a hardship yet, but you soon will be. Now is the time for you to figure out what your options are for dealing with this house. I’d recommend you consider each of the options in this series but, in particular, you may want to find out if a short sale is a good option. (I wrote about that option in this series.)

      Get advice from experienced professionals in your area. Meet with a real estate agent who has sold a lot of homes via short sales to look into whether that’s an option. If it looks like it may be, meet with a real estate attorney who helps homeowners with short sales. If it turns out that won’t work, the attorney may recommend a deed-in-lieu of foreclosure or something else.

      I also recommend you find out asap what the tax implications would be for these options because the Mortgage Forgiveness Debt Relief Act expires at the end of 2012. You’ll learn more about that in these articles about 1099-Cs. You may need to act quickly to resolve this by the end of the year to avoid a large tax bill so find out as soon as you can.

  • catherine herdman

    I purchased my home for 100k$, even tho it need work, I didnt care, I just wanted a home of my own after renting for 15 years. after the seller dropped it from 130k. Back then, in 2006 this was a great deal to me, since it was a double lot, 3 bdrm, and a pool. Plus and entrance to a main road instead of usingthe community roads. The comunity came after me for dues and all other things. But besuides that, the banks kept changing. every year I received a letter saying I had a new bank and payments were rising from the original 800$ to 1200. Somehow Things got messed up with the insurance that i was suppose to pay with the mortgage. so that added up ontop of the regualr payments. Currently the bank thats in charge now says I owe 110,00, Its like they didnt even include the payments i was sending over the years, and thigns deffinitly got screwed up from the banks changing atleast 4 times. Im In foreclosure, I went to a bankrupcy laywer and was ready to start filing bankrupt, then the mortgage company sent a letter saying I only need to pay 1600 to catch up. Im so confused. Either way I dont really want to stay in this house because its falling apart and Im a single mom, making only 350 a week. I have no problem filing bankrupt, but Id really like to know is there a way I can somehow sell this house to the bank, and get all this dropped? Because I just found a house forsale for 20k thats in better shape then mine and has more room abd a garage for my son to work on his cars. What do I do? Should I file bamkrupt? and keep the house? Or try to figure out someway to get out of this house without troublr so I can get the house for sale for 20k I really want? Because If I file bankrupcy I wouldnt be able to get finance for 20k for the house i want. Im lost.
    looking forward to your information. Thankyou. Cathy.

    • Gerri Detweiler


      It sounds like a very stressful situation you are in. Your bankruptcy attorney is the one who should be covering all these options for you. You can’t sell your home to the bank, but you might be able to do a deed in lieu of foreclosure. Or you might be able to get the bank to agree to a short sale – especially if it knows you are filing for bankruptcy. Less likely, but still possible, is that the bank would agree to a loan modification with reduced principal if you stay in the home. Have you asked the attorney about those options? (You can read more about each option in the series that this article is part of.)

      By the way, I would not recommend you make any agreements with the bank to “catch up” without running them by a real estate or consumer bankruptcy attorney with experience in foreclosures. It sounds like you are in a toxic loan and you don’t want to prolong the agony.


  • Larry W.

    My house was valued at $120,000 when I purchased it 5 years ago. The foundation collapsed on the north and south side of my home causing the water to be ripped from the foundation. It is going to cost $50,000 to repair my home, but in the meantime, I lose my finished basement and my house will not be worth, but half of what I am supposed to pay. I want to walk away. Any suggestions?

    • Gerri Detweiler

      Ouch. I’d suggest you meet with an attorney who handles short sales/foreclosures and talk with them about your options, whether that is a short sale or a deed-in-lieu. Be sure to get professional tax advice as well so you don’t end up with a surprise tax bill for cancellation of indebtedness income.

  • Pat M.

    I’m going to stop paying my mortgage this month… My wife and I divorced and the monthyly payment is %75 of my net income! Roommates help pay the bank. HOA fees, tax increases and insurance are killing me!

    • Gerri Detweiler

      So sorry to hear that Pat. Let us know what happens.

  • Richard Neva

    I pay my mortgage to Wells Fargo Home Mortgage, they are criminal lenders and active in the drug laundering business. Why do I have to deal with them? I thought it was against the law to deal with known criminals! I am fed up with America and I hope it goes to hell!

    • http://imeekanem@hotmail.com Ime

      That is a serious accusation. Do you have any proof that Wells Fargo Home Mortgage are “criminal lenders active in money laundering”?

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