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Deed in lieu vs foreclosure or bankruptcy

Posted on: 08th Oct, 2007 07:20 am
I'm in a situation that seems to be unique. Let me try to explain.

I have 2 investment properties, that are now in negative equity and still going down. I have been supporting them for over 2 years now, but getting very close to not being able to pay for them any longer. Have lost a lot of money on these investments.

One of the properties qualifies for a deed in lieu as its been on the market for longer then 3 months, the other, unfortunately has not. I have not been actively trying to sell it as nothing is selling so I did not bother to put in up for sale.

I'm now facing a dilemma, should I deed in lieu the properties, or foreclose or go to bankruptcy court. I still do not entirely understand how my credit is effected in each scenario.

Thanks in advance for any positive advice that you can give.
Welcome Plato,

I can understand that you're going through a tough situation. Are you still current on your payments? If not, then you may request the lender for a deed in lieu.

In deed in lieu, your property will be sold by the lender to recover his debts. The deficient amount from the sale of the property will be forgiven. But it will lower your credit score by around 250 points.

If you are current on your payments and want to save the property, then you can try to refinance it at a lower rate.
Posted on: 29th Jan, 2009 11:13 pm
But if you do a deen in lieu you receive a 1099 at the end of the year which is considered a gift and is taxed @ 25%, correct?
Posted on: 05th Oct, 2009 10:55 am
hi hope,

in case of a deed in lieu of foreclosure, though the lender forgives the deficient amount, you won't be liable to pay the taxes as per the mortgage debt relief act. to know more about the mortgage debt relief act, check out the following page:
http://www.mortgagefit.com/california/debtrelief-act.html

thanks
Posted on: 05th Oct, 2009 11:58 pm
My husband died suddenly and left me in a difficult financial situation - I have a good paying job and am working through things as I go - but there is no extra ready cash on hand. or in the esstate hopper. I have a plan worked out where I can pay all of my joint debts plus the house and living expenses, except for the Wyndham vacation timeshare deeded NC. I still owe money on that loan plus monthly maintenance fees. I just do not know what to do - I thought foreclosue would be good since it is not my primary residence but now I am not sure b/c i read here on the forum I might have to pay the diff if the company can even resale? Timeshare business I am sure is down like everything else. I do not want to keep it and the company does not seem receptive to any conversations about what I can do. any advice?
Posted on: 04th Feb, 2010 01:18 pm
You can contact your timeshare company and apply for a loan modification. If the interest rate is reduced by the lender, it would become easier for you to pay off the loan. If the lender does not agree to it, then you can apply for a deed in lieu and sell off your property. You won't liable for the deficient amount then.
Posted on: 05th Feb, 2010 01:48 am
I am in a situation where I have been unemployed for 1 1/2 years and unemployment ran out. Husband has income weekly, but still in negative with payments including the mortgage. Are just about 90 days late and the mortgage loan servicer says that we do not qualify for deed in lieu at this time only foreclosure. What would be the best option of the 2 or should we file chapter 13
Posted on: 28th Jun, 2010 07:59 am
hi lpt!

welcome to forums!

deed in lieu is a better option compared to a foreclosure. unlike foreclosure, you won't have to pay the balance amount resulting from the sale of the property. however, the credit affects in both the cases are same. again, it will be the lender's discretion whether or not he would help you with the option of deed in lieu. i would suggest you to negotiate with the lender once again for a deed in lieu. in case, the lender is not ready, then you can go for chapter 13 bankruptcy.

feel free to ask if you've further queries.

sussane
Posted on: 29th Jun, 2010 02:04 am
we filed for chapter 13 three years ago and surrendered our home. we moved to another state. We received a foreclosure notice from the bank. Apparently, the home is still in our name. Can the mortgage company foreclose on us now or our we protected by our chapter 13? help
Posted on: 14th Aug, 2010 09:54 am
Welcome Teresa,

Though you filed bankruptcy, the lender will be able to foreclose as he holds the lien on your property. However, the lender will not be able to come after you for the balance dues resulting from the sale.
Posted on: 16th Aug, 2010 12:02 am
We can't afford to pay to have our home repaired and want to let it go should I do a bankruptcy or foreclosure. I'm the only one on the loan but I had a chapter 7bankruptcy 7 hrs ago
Posted on: 06th Nov, 2010 05:17 am
Hi Hova!

Welcome to forums!

You won't be able to file bankruptcy before 8 years of your previous filing. In such a situation, you can contact your lender and apply for a deed in lieu of foreclosure. This will help you in getting rid of the property and you won't be liable for the deficient balance resulting from the sale of the property.

Feel free to ask if you've further queries.

Sussane
Posted on: 08th Nov, 2010 03:34 pm
If you face an overwhelming dilemma of the decision to file for bankruptcy, foreclose on your home or to request a short sale, short selling is what you want to take fully into account before a lender files to ignore in its home.One way to avoid that exclude your home and bankruptcy is to contact your lender and get approval to do a short sale, which means the sale of your home for less than its worth.
Posted on: 11th Nov, 2010 11:39 pm
We have 6 residential investment properties that are bleeding us to death with tenant turnovers, swatters, judgments and repairs.....have credit scores over 800 and never been late! So the mortgage companies won't negotiate with us. No more money and have been advised by the attorney to stop pay and do chapter 7 for relief..........any less drastic options?
Posted on: 08th Dec, 2010 04:59 pm
Welcome Jerwil,

Unless you're late on your mortgage payments and you're facing financial hardship, the lender will not be ready to help you in this matter. If you can afford, stop paying the dues for a month and try to negotiate with the lender in order to get a deed in lieu of foreclosure. This will help you in selling off the property and you won't be liable for paying the deficient balance resulting from the sale of the property.
Posted on: 08th Dec, 2010 10:47 pm
Is it possible for the owner to do a deed in lieu after a petition for bankruptcy chapter 7 is file? if should not, why not?
Posted on: 22nd Dec, 2010 07:07 am
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