Considering Foreclosure

[tractoring]

What is the name of your state? Michigan

My wife and I built a 3,000 ft2 country home 3 years ago on 10 acres. We would like to move to the South, but the housing market has tanked in Michigan. We owe $335,000, but the market will only support $250,000 - $275,000 right now. We make $120,000/year with only $20,000 in 401K. Lender is Flagstar.

We are definitely new money/college educated and are working to change our lifestyle.

We have family that will help us buy/build another house, but I don't want to drag all this debt with us. We also have $30,000 in high interest credit card debt. We have totally mismanaged our resources.

1. If we move to another state and abandon the home and payments, what would happen?
2. Would we have to pay the difference between the sale price and what we owe?
3. Should we file for bankruptcy?
4. Any other recommendations?

Thank You.

[FlyingRon]

Originally Posted by tractoring

1. If we move to another state and abandon the home and payments, what would happen?

Your loan will go into default, your credit ruined, foreclosure will begin the house will be sold.

2. Would we have to pay the difference between the sale price and what we owe?

And then some. There will be unpaid interest plus other fees.

3. Should we file for bankruptcy?

How much other debt do you have? If you're reasonably solvent it would be stupid to file for bankrupcy (it's not like you just say "OK I'm bankrupt, I'll start over,... it's much more involved than that.

4. Any other recommendations?

Much has you hate to do so, stay put. You should be able to afford the payments on the salaries you indicated. Wait until you get some more equity (by the market recovering) or find some money somewhere that you can use to accept a sale short of what you owe.

[tractoring]

We have $30,000 of other debt. If we file bankruptcy and foreclose on our house, we would be looking at paying back about $110,000 in deficiency and debt.

How long would we be given to pay this back through a trustee?

What is the best option for debt reduction?

I guess the other option would be to move and keep paying on the house until it sold. Not sure if we could afford to do that.

[lcannister]

What is the best option for debt reduction?

Change your life style for a while and cut out all the fluffy that is now being spent. There is no reason on earth, save financiallly obligations we do not know about, that you can not make it on 120K per year and pay off 30K in debt. If there is a significant other that is not working then it is time for staggered shifts (if child care is an issue) of working and even second jobs for 6 months to a year.

We have family that will help us buy/build another house, but I don't want to drag all this debt with us.

In my opinion the worst think that could happen to you is that family bails you out so you can once again act irresponsibly and "move south" because you WANT to. Stay there for awhile and pay your debt down or off then decide you want to move elsewhere.

What you need done is VERY manageable without filing BK so the rest of us can pay your debt off for you!

Good luck, buckle down and dig yourself out of this mess YOU created for yourselves.

[FlyingRon]

While I don't agree 100% with what he says (some of his back of the envelope calculations are a bit suspect) but you could do worse than to listen to this guy:

[url]www.daveramsey.com[/url]

He'll give you a good reality check on your debt situation and getting out of it.