When you first began noticing you were struggling financially, you probably did what many other New York residents in similar situations do: tried to cut spending, looked for sales when purchasing things, and perhaps even sold a few items to increase cash flow. That may have even worked for a while.
Now that things have gotten worse, however, with creditors hounding you almost every day by phone, your position at work slated for a cut-back, and no way to restore financial stability in the foreseeable future, you might be tempted to up and walk away from your mortgage, leaving your home to foreclosure.
Reasons why that may be a bad idea
If you are having thoughts about abandoning your mortgage, you are certainly not the first person ever to do so, and likely will not be the last. Before you decide whether to walk away, you might want to consider the following potential repercussions:
- When a lender forecloses on your home, your credit rating is going to plummet. Sometimes, credit scores sink as much as 100 to 200 points when home foreclosures occur. It will be at least seven years before the foreclosure no longer affects your credit rating.
- If you walk away from your mortgage then are able to purchase another home a couple years later, it is highly unlikely you’ll qualify for a loan.
- The Internal Revenue Service considers unpaid debt as income. When the lender resells your foreclosed home, that agency will report it to the IRS, and you may be hit with taxes on the amount of cancelled debt.
- If you keep your home and you’re late paying your mortgage, the bank can’t report that to a credit collection company for at least 30 days. If you abandon your mortgage, there’s no time limitation set for when the bank can report the default. This can impede your ability to rent an apartment or find another place to live.
You obviously can’t wish away your financial problems. You can, however, seek options through your lender if you’ve hit a brick wall and are unable to rebound insofar as your mortgage is concerned. Whether you’ve only lived in your home a few years or have built decades of memories inside its walls, you have every right to explore all options available to keep your home out of foreclosure.
It often helps to speak with an experienced bankruptcy attorney who can advocate on your behalf and make suggestions as to what option may be best to help you obtain immediate debt relief and restore financial stability.