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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.
Hi Jose!

Welcome to forums!

If the bankruptcy has been already filed, then you cannot go for deed in lieu of foreclosure. The lender will not consider your request before the bankruptcy filing is discharged. This is because the court will issue an automatic stay against all the creditors and they won't be able to take any actions regarding your account.

Feel free to ask if you've further queries.

Sussane
Posted on: 22nd Dec, 2010 08:18 pm
have had changes to income due to husband in jail and now with loss of income difficult to maintain payments for primary and only residence. have applied for assist with pnc mortgage and was refused. want to leave home and wondering what options are. home in my area are not selling. have no equity to speak of.
Posted on: 11th Jan, 2011 02:50 pm
welcome cryan,

you can apply for a deed in lieu of foreclosure in order to get rid of the property. moreover, you won't be liable for paying off the deficient balance resulting from the property sale. however, it will be the discretion of the lender as to whether or not he will approve your request.
Posted on: 11th Jan, 2011 10:35 pm
i have an investment house in CA and lived in NJ payment
wise is it better to forclose the house. It is scheduled for forcosure already and we are trying to do deed in lieu, help.
Posted on: 15th Jan, 2011 08:38 am
Welcome apso,

You should write a hardship letter to the lender in order to get a deed in lieu of foreclosure. However, it will be the discretion of the lender as to whether or not he will accept your request for a deed in lieu of foreclosure.
Posted on: 16th Jan, 2011 10:36 pm
We have 2 properties, our primary residence and a rental house. We are in Las Vegas, NV.

I have been unemployed for 3.5 years. My husband just had his pay cut in half.

We contacted our lender, who holds the mortgage for both properties, to apply for modification on both properties.

Our rental house is in my name & my husbands name. Our primary residence is in my husbands name & his moms name. His mom lives on the property in a casita.

In July we contacted our lender to let them know that our savings was empty and we couldn't afford to make any more payments on our rental house. Our last payment on the rental was in September. We applied for a loan modification in October. We also applied for modification on our primary residence in July.

Our lender (SunTrust Mortgage) told us this morning that they can't modify our rental. That our monthly debt is to much, that we are to upside down and they can't help us. So they are proceeding with foreclosure process.

We were also told on our primary residence, that is in my husbands name & his moms name, that they together make to much money and we don't qualify for the government HOPE program modification.

So basically we have been told no to any type of help.

We have met with an attorney who told us they might be able to get a short sale. We have a meeting with a different attorney this Wednesday.

We are trying to decide which option would help us. Deed in lieu or bankruptcy? My husband is incredibly frustrated and ready to walk away, but his fear is the taxes that would be owed after foreclosure and having our money or assets seized.

Thank you ahead of time for suggestions!
Posted on: 07th Feb, 2011 07:24 pm
Hi bombdigity!

Welcome to forums!

Rather than going for bankruptcy, it will be better if you could consider the option of deed in lieu of foreclosure. If the lender accepts your deed in lieu of foreclosure option, he will sell off the property to recover as much dues as possible and forgive the rest of the balance amount. In case of primary property, your husband won't have to pay any taxes due to the Mortgage Debt Relief Act. However, in case of the rental property, you and your husband will be liable for paying the deficient balance in full.

Feel free to ask if you've further queries.

Sussane
Posted on: 07th Feb, 2011 11:00 pm
I want to make sure I understand.

On our primary residence, a DIL, if accepted, will wipe out any remaining balance on the loan as well as the taxes.

On the rental house, a DIL, won't? We'd still be responsible for paying whats left after its sold?
Posted on: 08th Feb, 2011 06:48 am
Hi bombdigity,

The lender will forgive the deficient balance resulting from the sale of your primary residence whereas you will be liable for paying the deficient balance in case of the rental property.

Thanks
Posted on: 08th Feb, 2011 10:57 pm
I have a mortgage modification, but still the monthly payment is high, My husband died and is only my income. The bank is no willing to any other adjustment, so my questions is what option is best bankruptcy, foreclosure or shortsale.
Posted on: 22nd Jun, 2012 07:23 am
Hi Mayra,

I think it will be better if you could apply for short sale in order to get rid of the property. You should contact your lender and apply for short sale by mentioning your hardship.

Thanks,

Jerry
Posted on: 25th Jun, 2012 01:58 am
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