Posted on: 17th Jun, 2011 09:50 am
My chapter 7 discharge date was 10/2005.
I purchased a home after the discharge. My loan is an FHA home loan at 5%.
My income has decreased. I have a small savings account (1000.00).
What are the financial and legal ramifications of walking away from the home at this time?
I purchased a home after the discharge. My loan is an FHA home loan at 5%.
My income has decreased. I have a small savings account (1000.00).
What are the financial and legal ramifications of walking away from the home at this time?
It would depend on the state you live in and the type of deed that was used in the loan. Some states are judicial foreclosure states, which most allow for a deficiency judgement to be attached to the owner. Florida for example, can collect for the judgement up to 20 years later. States such as CA, the lenders only recourse is the property in collateral. There are also TAX implications as well. The IRS treats a loss as income in the case of a foreclosure sale that is less than the amount owed on the mortgage. I do not advocate to walking away, because you signed a promise to pay, and each person that walks away, makes the property values go lower, give lenders a reason to tighten their standards and leaves the community with abandoned homes. Try to rent out your home and cover the difference. The market will eventually turn and if you lose the asset now, you could lose out on the dream of homeownership.
Hi CRich!
Welcome to forums!
If you walkaway from your property, the lender will foreclose it as he won't be receiving the payments on time. After foreclosure, he will come after you in order to recover the deficient balance resulting from the sale of the property. Also, this will lower your credit score by around 250 points.
Feel free to ask if you've further queries.
Sussane
Welcome to forums!
If you walkaway from your property, the lender will foreclose it as he won't be receiving the payments on time. After foreclosure, he will come after you in order to recover the deficient balance resulting from the sale of the property. Also, this will lower your credit score by around 250 points.
Feel free to ask if you've further queries.
Sussane
