This has been the most common question I get for a long time, so I will periodically post on the possible answers.
If you are current, and can afford to continue paying, there is really no bankruptcy alternative.
You can stop paying, the so-called “strategic default“.
Unfortunately, there is no accurate prediction as to what your mortgage company will do.
(image from http://www.ehow.com/info_7928551_lost-job-cant-pay-mortgage.html)
You can try a short sale, but the mortgage company has to agree, and they may require you to sign a note to pay some or all of the difference between the sale price and the mortgage balance.
You can try a deed in lieu of foreclosure, but, again, that requires the mortgage company to agree.
With either a short sale or deed in lieu, you have to be ready with another place to live.
So, what if you just stop paying?
Maybe the mortgage company forecloses, but do not hold your breath.
I have seen cases of people two years behind in payments, who have not been forelcosed.
One reason?
Your mortgage company is not a real estate company, it is a money company.
It is probably already stuck with tens of thousands of homes it is trying to sell, and is not looking for one more.
Not that this has motivated them to make reasonable modifications, something you can afford that gives real relief.
All these options presume your home is worth less than what you owe on it.
If you can get more, go ahead and sell.
Also, I have presumed there is only one mortgage on your home.
If you have two, things get complicated.
You cannot do the deed in lieu, because the second mortgage is in the way.
You can do a short sale, but now two mortgage companies have to sign off.
Same with modification.
Can be done, but no point unless you get a realistic deal from both.
More on this Thursday.
The Real Truth About Mortgages (Part One)
