foreclosure vs bankruptcy

[sharilee]

What is the name of your state? NC
Long post, but we desperately need help. We own a house in a different county that was our primary residence for 8 yrs. We had to relocate in 2005 due to my husband's job and were unable to sell the house (we have a no-equity 2nd mort. and are upside-down on the value, plus it needs a new roof and windows that we can't afford to replace.) So we got renters, and are leasing a house ourselves in our new location. But due to the lower-income and slow real estate market of the original house, we couldn't get any renters that could afford to pay our entire mortgage payment (1st and 2nd mort together are $1300/mo) so we had to lower the rent to $750. So we have been paying the difference, plus taxes, insurance and repairs every month. Then my husband lost his well-paying job and got another one paying much less. We are living paycheck to paycheck and running up our credit cards, and are behind on bills (2nd mort is almost 60 days behind). Our renters are unable to get a mortgage to buy the house themselves and have just informed us they are moving out in 30 days to a cheaper house. We are drowning in payments with no way of making any headway, and we cannot afford to make the 1st mort. payment while we try to get the house ready for new tenants. We thought about moving back, but my husband won't be able to get a comparable job there and it is too far away to commute to our jobs here. We are so exhausted from the stress of owning this house that we don't even want it anymore, but it seems we are not eligible for any protection or programs since it is not our primary residence. I feel like we should foreclose and use the money we were paying towards the house and pay our credit cards off so we still have positive credit activity and salvage some credit. But I worry about a deficiency judgement from the 2nd mort. and taxes, even though we should qualify as insolvent. Would bankruptcy be a better alternative to protect us, though we will not qualify for chapter 7, so would have to file chapter 13 and keep the house. Any advice would be appreciated.

[dmiller12]

Bankruptcy will not eliminate the payments or sheild you from a deficiency judgment on the home you cannot afford. Have you tried selling the home for less than what is owed and requesting a short sale from the bank? If you haven't' try this first. You'll need a good real estate agent who is versed in negotiating short sales.

You could also request a deed-in-lieu of foreclosure. Communicating with your lender about your circumstances and negotiating a plan of action that softens the blow for all parties will do more to shield you from a deficieny judgement then anything else. With a deed-in-lieu, the bank may not give you a 100% FREE pass so make sure you understand their intentions concerning a possible def. judgment. before signing the paperwork.

Best first step, call a Real Estate Agent who's reputation demonstrates experience and success in short sales. Next step, call the bank if the agent recommends it.

Good luck

[sharilee]

Can you do short-sale or deed-in-lieu if it's not your primary residence?

[FlyingRon]

Originally Posted by sharilee

Can you do short-sale or deed-in-lieu if it's not your primary residence?

As long as the bank is willing.