Walking Away From a Mortgage
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What Does “Walking Away From a Mortgage” Mean?
Walking away form a mortgage is a term for when a homeowner simply abandons payments on their mortgage. While this may not necessarily be an illegal act, it may come with some serious consequences, and as such, is generally unadvisable. However, many consumers end up walking away from a mortgage every year, due to the inability to keep up with payments.
There may be some instances when it may be acceptable to walk away from a mortgage, such as if the homeowner discovers that the mortgage was actually presented to them through a scam or through mortgage fraud. However, even so, it’s usually best to obtain legal representation, and formally get out of the contract before abandoning the mortgage.
What are the Consequences of Walking Away From a Mortgage?
Ceasing mortgage payments will put you in “default” status with the mortgage lender. This can lead to consequences such as:
- Negative impacts on credit scores (the lender will usually report mortgage defaults to credit bureaus)
- Foreclosure: Walking away from a mortgage will typically result in a foreclosure proceeding, in which the mortgage lender obtains a lien on the property title. On the other hand, various foreclosure alternatives may exist if you choose to continue working with the mortgage company
- Tax consequences: Unpaid debt is treated as income for tax purposes. Thus, even though you won’t be making anymore payments, you may still be taxed on the missed payments
- Civil liability: The lender may simply sue you and attempt to reach other assets of yours in order to make up for the missed payments
Thus, one needs to understand the various effects that will happen upon walking away from a mortgage. While it may seem like a short-term solution, it may lead to more legal issues to deal with in the future.
Do I Need a Lawyer Before Walking Away From a Mortgage?
Knowing how and when to walk away from a mortgage can help you avoid unnecessary expenses and legal woes. You may need to hire a qualified lawyer if you need assistance with any types of mortgage or real estate issues. Working with an attorney early on can help save you avoid legal issues down the road. Also, your lawyer can provide you with legal representation if you need to participate in a real estate lawsuit.
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Last Modified: 06-21-2013 11:11 AM PDT
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