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Mortgage underwater and do not want to keep your home? Now what

This might seem like an odd question, but it is one that many people ask themselves. Not everyone in who owns a home here in New Jersey or elsewhere wants to fight to keep it. If your mortgage is underwater and you do not want to keep your home, you could be asking yourself what to do about it.

Many New Jersey residents realize that even if they had no other debt, they could no longer afford to make the payments on their mortgage loans. Still others could be so far behind that no matter what kind of deal could be made with the lender, they would never get caught up. Selling the home might be an option, but there is no guarantee that it would happen quickly, if at all.

In many cases, the value of the home is still less than what is owed. This means that the lender could continue to look to the homeowner for the remainder of the balance. On the other hand, the lender could forgive the remaining balance, but then it would be taxable as income. When the amount forgiven is in the tens of thousands of dollars, that could cause a significant tax burden on a homeowner who is already having financial issues.

Bankruptcy could provide you with the opportunity you need in order to just walk away. It might be possible to surrender the home to the lender and be freed from any further monetary obligation to the lender without any tax consequences. If you are in financial distress, behind on your mortgage loan and facing foreclosure, it might be better for you not to keep your home. Furthermore, filing for bankruptcy could also wipe out other debts. You could start over financially with a clean slate. 

Source: FindLaw, "Can I Keep My Home After Filing Bankruptcy?", Accessed on March 7, 2016

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