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Hello,
We (husband/wife) own two houses in IL. A primary residence with 80/20 loan. A second rental poperty with 80/20 loan. We are current with all the payments/Taxes as of now but we have recently both lost our jobs. The properties have devalued roughly around 35% over 4 1/2 years and can't be refinanced due to our job situation. We have no equity in these properties and will have no regrets by just walking away from it.

We are confused about how to get rid of these mortgages in near future. Is chapter 7 a better solution? But will it get rid of the jr. lenders off our back? or deed in lieu? but what about the diffrence for the balance? We will have no income so Chapter 13 is not an option for us. We are willing to risk our credits but our main concern is "we dont wanna deal with any future LEINS towards our future investments". Will Chapter 7 stop everything? we take a hit on the credit score and then move on with our lives.
I know its lots a questions but your insightful response would be greatly appreciated.
thanks
Kaash

jameshogg · Posted: Thu Nov 19, 2009 7:36 pm Post subject:

Hi Kaash,

You can file Chapter 7 and get rid of your properties. If you do not sign the debt reaffirmation agreement, you won't be personally liable for the mortgage. However, the lender would still hold the lien on the property, so he will foreclose the property to recover the dues. If you file Chapter 7, it will lower your credit score by 200-250 points and will remain on your credit report for 10 years.

However, before taking any decision, I would suggest you to contact a bankruptcy attorney and take his opinion. He will help you understand the details of filing bankruptcy and would let you know which chapter of bankruptcy would be best suited for your case.

Thanks

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Chapter 7, Deed in lieu or Foreclosure