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Just Walk Away...

Posted on in Bankruptcy Attorney

For some homeowners, especially those who are significantly underwater, walking away from the property is the desired outcome. They ask themselves “Why should I payoff or modify a loan for $200,000 for a property that is only worth $100,000?” This is a very good question, and an important one to ask. The problem in this situation, however, is a personal deficiency judgment. This is when the bank can take a judgment against the borrower personally to satisfy the outstanding amount of the debt that remains after the property is sold.

For some homeowners, sentimentality is the answer. The property is very important to them as it is the only home they have ever owner or it is where they raised their children. If this is the case, then a modification is an excellent option, if possible.

If, however, the sentimental value associated with the property does not rise to the level of wanting to payoff or modify an underwater property. For those homeowners, the a big concern is a personal deficiency judgment against their personal property or assets.

There are a few options in this situation:

1. A Short Sale. The homeowner sells the property for less than the amount owed. They present the offer to the lender. The lender must approve. The lender MAY waive deficiency depending on the sitaution.

More to follow…

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