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Law Educator, Esq.
Law Educator, Esq., Lawyer
Category: Real Estate Law
Satisfied Customers: 118635
Experience:  Licensed attorney practicing landlord-tenant, land use and other real estate law and litigation.
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I am upside down on my house mortgage. When I retire in

Customer Question

I am upside down on my house mortgage. When I retire in 2years I will be unable to pay my mortgage? Can I declare bankruptcy? Can I walk away? Should I talk to the lender? I have been paying my mortgage on time.
Submitted: 2 years ago.
Category: Real Estate Law
Expert:  Law Educator, Esq. replied 2 years ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
If you declare bankruptcy, you will likely lose the house, but you would not be liable for any deficiency amount on a foreclosure. If you allow them to foreclose, which is likely coming, then they will hold you liable for any amount on the loan that is over the amount they sell the home for. You can start now by negotiating with the lender to accept "cash for keys (deed in lieu of foreclosure)" and take the home back in full satisfaction of the debt (most lenders at this time are not really willing to do this except in rare circumstances) or to agree to a short sale. However, in negotiating a "deed in lieu" or a short sale, the lenders would want you to be delinquent in your payments for at least 4-6 months, so that could harm you too because a deed in lieu or short sale would put you delinquent and there is no guarantee that they will agree to one (you could put the regular mortgage payments aside in a separate bank account in case they refuse to negotiate so you would not get hurt badly if they refuse and you have to bring the mortgage current).
Bankruptcy is the last option if they refuse to negotiate and if you file bankruptcy you can walk away from the house and not have any deficiency judgment, as the bankruptcy would discharge the deficiency.