Can I walk away from the home without it affecting my credit again?

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Can I walk away from the home without it affecting my credit again?

I delcared bankruptcy 2 years ago that included my home. I moved back to the home and the bank modified the loan to include the amount in the arrears. I no longer can afford the payments and will be moving out.

Asked on March 19, 2012 under Real Estate Law, Washington

Answers:

Michael Duffy / Duffy Law, LLC

Answered 9 years ago | Contributor

Hi there,

This would really be a bankruptcy question. It sounds like you "reaffirmed" your mortgage with the bank. That would mean you agreed to continue to be responsible for the debt and it would survive the bankruptcy. If you walk away from the house, the bank can foreclose. You missed payments and foreclosure would be reported to the credit rating agencies and almost certainly negatively impact your creditworthiness.

If the forclosure sale satisfies your debt, then you can begin to move on. However, if you filed a Chapter 7 bankrutpcy, you would not be able to file again for eight years. This means that if there is a deficiency after the forclosure sale (very common with today's glut of underwater mortgages), the bank could continue any and all available collection actions against you. Bankruptcy protection would not be available, and you could have judgments, liens, and ganishments against your personal property, accounts, income, etc. If you are unable to saisfy the debt (as the interest likely compounds), you would be without recourse until you were again eligible for bankruptcy protection.

This is all information that your bankruptcy attorney should have presented you with previously, particularly before making such a tremendous decision as reaffirming a mortgage. Best of luck.


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