Walking away from mortgage- please no flames here just advise or experiences

[Nom]

Please no flames.

I am in a tough situation and recently had a divorce. I am a single mom who gets very minimal child support because I used to have a well- paying job I was recently laid off from. My daughter is 5. I want to move to a less-expensive place and to be closer to family, but the house is upside-down on the mortgage- if it sells I would have to pay about $20-40 k into it and wipe out my 401K to do that. I don't think they will consider a short sale because I still do have the 401K. I also still have legal bills from the divorce. I really do not want to live there due to bad memories and distance from family, and if I have not found a job before my sev package runs out, I am thinking about not paying the mortgage anymore and walking away from the house. This may be a better situation than being out of work with no money at all and tapping into 401 K to pay into a house that will take at least 10 years to come around to my mortgage amount.

Has anyone done this? I know obviously this will hurt my credit, but I have talked to an accountant and it will hurt my credit less than a bankruptcy. I have very good credit and no balances on my credit cards. It's been the $15000 divorce that wiped out all my savings- all I have left is my 401K.

Please do not flame- I am not saying I am going to do this I would just like to learn what others experiences have been.

 

[sweetpeakaris]

Sorry, No advice, but wanted to wish you luck and give you a

 

[Tinker'n'Fun]

sorry, no advice, but this is for you...

 

[delmar411]

I don't have any advice but wanted to say I'm sorry you are in such a rough position.

I hope you are able to figure something out to help you back on your feet.

 

[Nom]

thanks for the support! I know things will work out in the end (a horrible divorce teaches you that- no matter how tough things seem they do work out), but I was just curious if anyone has ever done this or knew anyone who has done it.

I am so glad not to have credit card debit!!!!!

 

[wdwfan16]

I have a hard time believing that walking away will not be as bad to your credit as a bankruptcy.

Did you aske the accountant if you will get a 1099 for th $20-40K that the bank will eat? If so, how do you plan on paying the taxes on that money?

 

[Maggie'sMom]

Not advice on the mortgage, but why don't you contact your state's child support enforcement agency and ask for your child support to be re-evaluated. A change in your employment situation will usually trigger that and you don't have to pay for an attorney to do it.

 

[taylor3297]

I am not sure that your 401K can be considered when looking at a short sale, due to that this not money that is readily available. Before you do anything, you really need to get some good financial and legal advice.

 

[punkin]

Is the loan on your house a "recourse" loan? If it is, you may be stuck to the difference even if you walk away. If you have a no recourse loan, just send the keys to the bank and take the credit score hit. There is nothing else they can do to you.

 

[Nom]

I am still paying my lawyer (I feel like I will be paying her forever!), so the next time she calls about his response to my proposal for selling, i am going to talk to her about all this. (I don't like to proactively call her except in dire straits because I am trying to minimize the bills)

 

[mindyd]

My Aunt had done this, she basically quit paying the mortgage and it went on for I think 6 Months. She tried getting different plans etc and they would not work with her so she just waited for the house to go up for foreclosure and banked the money she should have been paying for a mortgage. She also was told it was better then filing a bankruptcy. Even after doing all of this she was able to get credit cards. They sold the house and she owes the difference from what they sold it for and her mortgage which is a huge amount.

 

[Nom]

Is the loan on your house a "recourse" loan? If it is, you may be stuck to the difference even if you walk away. If you have a no recourse loan, just send the keys to the bank and take the credit score hit. There is nothing else they can do to you.

I read about this in the NYT a few weeks ago, which was what got me thinking about it. I am not sure if it is a 'recourse' loan- it was just a standard 30 year- but I will have to check it out.

I have to be out of work for a certain period of time before I can petition for an adjustment in child support, so I would have to wait on that, but it is in the back of my mind.

eta I am just trying to plan for the worst case scenario, since it's not just me, I also have to think of my daughter. who knows, maybe I will be lucky and find a job relatively easily!

 

[punkin]

Also, I believe (I may be wrong here) that the law no longer allows 1099 for a mortgage foreclosure.

 

[punkin]

I read about this in the NYT a few weeks ago, which was what got me thinking about it. I am not sure if it is a 'recourse' loan- it was just a standard 30 year- but I will have to check it out.

I have to be out of work for a certain period of time before I can petition for an adjustment in child support, so I would have to wait on that, but it is in the back of my mind.

eta I am just trying to plan for the worst case scenario, since it's not just me, I also have to think of my daughter. who knows, maybe I will be lucky and find a job relatively easily!

It depends on your state laws.

 

[secretpantssam]

 

[pixiewings71]

Hugs to the OP. I hope it works out for you. I'm curious tho, what's a "recourse" loan?

 

[It'sWDW4me]

There's a lady I work with - she and her husband are walking away from their home/mortgage. They're 100% mortgaged and they've been trying to sell it for a full year now. Her husband lost his job last summer. She figures her credit's shot at this point so it really doesn't make too much of a difference if it's dinged some more. She said her brother walked away from his house a few years ago and he's been able to get credit cards and a car loan. I doubt if that was right away and he probably paid a higher interest rate but life does go on...

Good luck and I hope things turn around soon for you.

 

[wdwfan16]

There is information her that describes when you will owe and when you can pay no taxes.


http://www.irs.gov/newsroom/article/0,,id=174034,00.html

 

[Nom]

Here's the article I read that got me thinking about this as a potential (worst case) option- it is pretty interesting.

http://www.nytimes.com/2010/01/10/magazine/10FOB-wwln-t.html?scp=1&sq=walk%20away%20from%20mortgage&st=cse

 

[Nom]

There is information her that describes when you will owe and when you can pay no taxes.


http://www.irs.gov/newsroom/article/0,,id=174034,00.html

thanks for the link, that is helpful. and thanks It'sWDW4me for sharing your co-worker's story! It's a lot to think about and discuss with my lawyer and accountant when and if the time comes.