Should we ask for a deed in lieu from our lender or file cha

gtownky · Joined: 03 Jan 2008 Posts: 1 1.40 Dollars($)

We bought a 2nd house due to getting a new job and were advised that our previous house would sell within 60 days. It is 2 and a half years later and we have dropped the listing price by 80,000. We have exhausted our savings and incurred more debt to cover the two mortgages. Would a deed in lieu be something to consider? If the lender accepted, would we be expected to pay taxes on the difference between what it sold and what we owe? (We owe approx. 256,000 and it is currently lited for 219,000 and not selling.) Or should we file for chapter 13 bankruptcy and keep paying whatever is determined by the judge for the next 5 years. We want to keep the 2nd house. Thank you for your help!

larry · Joined: 27 Jun 2007 Posts: 3328 473.51 Dollars($)

Hi gtownky,

Welcome to the forum.

If you file Bk that will hurt your credit and will have a huge negative effect. It will drop your credit score by almost 300 points and appear on your credit for 7 to 10 year.

So consult with your lender and try out deed in lieu.

Feel free ask if you have any further questions.

Best of luck,
Larry

blue · Posted: Thu Jan 03, 2008 4:38 pm Post subject:

Hi,

Welcome to Mortgagefit discussion board.

I would say deed in lieu is a better option for you. If the lender accepts it, you should go for it.

"would we be expected to pay taxes on the difference between what it sold and what we owe?" the lender may ask you a deficiency judgment. If they exempt it then you need not to pay tax on it now. Previously the exempted money was regarded as your income and you had to tax on it. But now, after the mortgage tax relief law by President Bush you need not to pay tax on the exempted money.

Do let me know if you have any other questions.

Thanks
Blue

lisascherzer · Joined: 04 Jan 2008 Posts: 755 1.03 Dollars($)

Bankruptcy is not as bad as a foreclosure on your credit report. I would look into options such as a real estate agent and really do everything you can to sell it quick.

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