If You Decide to Leave Your House

Once it appears that foreclosure is inevitable, many people pack up their belongings and their families and immediately look for a new place to live. They fear losing reliable shelter and want to find another home as soon as possible where they will feel secure. Staying in a house facing foreclosure can be terrifying if you think you might end up out on the street. And it may be unbearably depressing if you are reminded every day that you won’t be living there indefinitely.

While these reactions to foreclosure certainly are understandable, foreclosure can actually be a time of opportunity. You will almost certainly have enough time to find a new place to live. Meanwhile, it may prove to be a big financial advantage to stay put for a while—maybe a long while.

Try to put fear and negativity aside as you assess your options to come up with the best choice for your circumstances. The articles in this section lay out the basic approaches to giving up your house and the advantages and disadvantages of each. For now, here's a list of your options once you decide to give up your house:

• Let foreclosure work for you. Stay in your house as long as possible without making any mortgage payments to save money for a future move.
• Short sale. Offer the house for sale, and persuade the lender to accept the offer and let you off the hook for the mortgage.
• Deed in lieu of foreclosure. Persuade the lender to let you sign over the deed in exchange for the cancellation of the foreclosure.
• Walk away. Move out when it suits you and let the foreclosure proceed. This works best when your lender can't sue you for a deficiency.
• Negotiate a mortgage modification. Engage in negotiations, even if you think your efforts will ultimately prove unfruitful, to avoid being labeled a "strategic defaulter" when you apply for a mortgage in the future.
• File for Chapter 7 or Chapter 13 bankruptcy. Eliminate any deficiencies or taxes you owe as a result of the foreclosure.