Debt Elimination: “Walk aways” leave debt behind.

In many states, if your house is foreclosed or if you turn it into the lender and it is sold for less than the mortgage, you are still obligated to pay the balance of the debt. To cope with this, you can do a “short sale” in which you find a buyer, then get your lender to agree to settle for the amount the buyer is willing to pay and eliminate the remaining debt.

However, In some states, so called “non-recourse laws” allow homeowners to pack up and leave their houses to the lender, and the lender is not allowed to come after any balance due when the house is sold, no matter how much of the mortgage debt is left. The downside for you is first, that you lose your house, and second that you will have a tough time getting a new mortgage for four┬áto five years.

This works ONLY if the house is your permanent residence and your mortgage is the one you used to buy the house. It may or may not apply if you have refinanced your house and taken out more money. You have to check your local laws. No one said debt elimination would be easy.

If you live in a state with such laws and if your house is “under water” (mortgage exceeds its value), you might want to consider this option rather than foreclosure if your lender will not adjust the mortgage principle down to more manageable levels. But talk to a lawyer before you do anything.

Not all debt is created equal – there are differnt ways to eliminate your debts.

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