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Good afternoon. If this were me, I would take the money out of the bank, stop making payments, and let the bank foreclose. That process will take at least 6-12 months for them to foreclose. It's not likely the lender will pursue you for any deficiency. Whether or not the lender even can depends upon what kind of foreclosure the lender in Washington uses.....if they choose to foreclose by non-judicial foreclosure which the overwhelming number of lenders choose, then the lender has no right to pursue a deficiency and all your assets would be safe. If, on the other hand, the lender chooses the judicial deficiency route, which lenders seldom do, then they could pursue a deficiency against you. But, Washington has a generous homestead
exemption which would likely protect the equity in your new home. Your retirement account assets are exempt from their reach. If you have excess money or assets, then you might want to consider putting your non-exempt assets into a family limited partnership. Carefully drafted, this converts assets that a creditor would find attractive to go after into a limited partnership interest with no control, no rights other than that of an assignment, no transferability, no marketability, and no right to distributions. The transfer is for fair market value…i.e., you are simply exchanging one asset for another of equal value to you. And, you maintain control through a general partnership interest that you control. Yet, when complete it essentially is an asset no one wants and thus the creditor is less likely to pursue the debtor. Family limited partnerships must be carefully drafted and one would need an attorney experience in this area to do so, but they can be a very effective method of asset protection.
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