Tempted to walk away.. advice?

[SalientRant]

Hi guys,

I'll probably be talking to a credit counselor soon but I'd love to hear some real people's advice too. I have a house I don't need and it's killing me.

My friend and I are living in Atlanta (we moved here in '07 for work, after being laid off) but still have our old house in Florida, four years into a normal 30 year mortgage. The house was purchased for about 115 k and is currently paid down to just under 100 k. My friend and I bought it together and both our names are on it. Teamed up, we've been able to keep current on it and most of our other bills, although our credit card balances have crept up to well over 10 k put together.

We did try renting it out but it was a disaster, lots of nonpayment and significant damage to the property. Currently a (different) friend is staying there just to make sure it doesn't get vandalized or anything.

Now, my friend wants to get shot of this whole thing, go back to school, etc. But he can't do that and still pay part of the mortgage. And I'm in no position to gamble by borrowing money to keep the house current in the hopes I can sell it for decent money when/if housing recovers.

Right now the plan is to try to spruce the place up a bit, get it on the market by April, and try like hell to sell it at something better than a loss. But if we're not lucky enough to move it within a few months then we'll need another idea to get out of it, so that my friend can go on with his life, go back to school etc, without me getting totally screwed.

Right now we are both working but he'll need to quit (and move away) to go to school. I'm already in a small apartment, but although I'd be happy to move in with a friend or something to save money, I'm only a few months into a year long lease that we signed together.

I am not concerned about my credit, I'm a pretty frugal person usually and have really only ever used my cards during these last couple years while trying to support this house I'm not in. But I don't know what I ought to be doing. I figure credit counseling can help with credit card and bill management, but it seems to me my whole problem is this house.

I have no assets to speak of so I'm tempted to have my friend sign himself off the house and the lease and then I'd try to file for bankruptcy, let the bank take the house and my other debts, and unofficially sublet from some students till I can build my credit back up. But I get the impression that wouldn't actually get my friend off the hook.

I'd be immensely grateful for any insight you guys could give me.

[username1223]

Try to avoid bankruptcy if possible. I have had to do it as a last resort and it is stressful. I would get the house on the market ASAP and try to get enough to pay off the credit cards out of the deal too. If you have 10,000 in credit card debt and can sell the house for 115,000 then that will do it. See how that goes before just giving up. You never know someone could buy it right away.

[SalientRant]

Thanks for your advice. The more we look into our options the more it looks like we should just stop paying the mortgage, use that money to start working on our debts instead, and let the bank foreclose. My credit card's with the same bank as the mortgage so I'm sure they'll shut down my credit line right away, but if I'm not trying to make the mortgage payments I should be able to handle the card and the rest of my finances just fine. So we just need to check and make sure the PMI guys can't or won't come after us.

But yeah, all the homes in our area that have sold lately were foreclosures and they all sold for less than we'd need to break even, if we consider the work the house will need, the realtor's cut, and the payments we'd have to keep up with while the sale was going on. Plus the local realtors are saying most potential buyers are waiting for the next wave of foreclosures when the bulk of the five year ARMs in Florida start coming up.

I feel terrible sticking the bank with probably 10-15k of unrecoverable debt, but that's about what I've put myself into trying to stay current all this time despite not living there anymore, so. What can ya do.

[Bk7LostHome]

We walked from our primary residence. It was worth it. My only regret is we tried to take the high road and we did not live in it for 6 mo's not paying like we could have. We moved after first month of non-payment, cleaned it spotless, told them to foreclose... and went out and rented another place.

When they didn't foreclose after 6 months, we filed chap7 and put it and our 2nd/3rd lien holders and 80% of our debt in it. While our credit will be jacked for a while, we earn more than enough to live on cash and rent a nice home.

I just couldn't be tied to a mortgage already adjusting to double the original payment and waiting on Bush, now Obama, to help convince my private non-Fanny/Freddie lender to actually give me an affordable payment like we had when we bought and paid for 3yrs perfectly.
Just not worth stretching every penny to make the mortgage note each month, then have them up it again 3 months later.
good luck.

[SalientRant]

Thank you, Lost. It's amazing how much stress I've dropped just from not worrying anymore about how I'm gonna keep making those payments. Sucks to end up like this, I had such great hopes when I purchased, and absolutely everyone said it was the best thing I could be doing. But now that I've made the decision it feels like my future is coming back.

Wishing you well, too.