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Foreclosure vs Bankruptcy if Home is only debt

Discussion in 'Foreclosure, Repossession, Auctions, Short Sales' started by Cricker, Mar 14, 2009.

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  1. Cricker

    Cricker Law Topic Starter New Member

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    Here's my situation as I am very confused on the laws and appropriate road I need to pursue. My condo has been for sale since Sept. In Nov, our HOA decided to increase our payments to $406/mo. (It was $365/mo). That steered people away from wanting to look at the property...so I put it into a short sale. The bank sent someone out last week to see what they'd accept for short sale (not sure what it's called )...but the place is considered new in wonderful condition but with the high HOA nobody will look at it.

    I bought the home in 2003 for $169,900...took out a second mortgage in 2006 for $76,000 to pay of a student loan. Currently, my condo is listed at $165,000 and will continue to go down. There are 10 other units for sale in the place and some are already bank owned.

    I have no other debt other than the mortgage. I'm confused about the whole foreclosure info I'm receiving. My realtor says if I walk away, and the house goes to auction and/or bank owned, that i'm not responsible for anything - even if the house sales for $100,000 but I owed $250,000. Is this correct?

    I've spoken to a bankruptcy lawyer who says I may be responsible for tax consequences if the foreclosure happens.

    Does anybody know the answer? Since this is my only debt, I don't want to file bankruptcy and have bad credit for 10 yrs. But if I am responsible for paying back anpercentage of what I still owe, even if it sales at auction, I don't want to have to file bankruptcy on this later..would rather do so now. But if bankruptcy can be avoided all together, and I can walk away from the house and not have to pay anything - other than bad credit for 5 yrs..then I'd much rather prefer this option.

    If anybody has any advice/information please share....the realtor says one thing, bankruptcy lawyer and other online info says another thing...I'm quite confused.

    Thanks so much!
     
  2. dee_dub

    dee_dub Moderator

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    Not necessarily. If the bank forecloses, it may be able to obtain a personal judgment against you for the shortfall. If you can get them to agree to a short sale, that's almost always a better option.

    As a matter of principle, I would prefer the legal advice you get from an actual bankruptcy lawyer to that you get from your realtor. :)
     

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