1.9 million debt, pls advise!!!

[lrjax05]

I hope someone can give an opinion or advise on our situation:

primary home: owe 1.3 mil, now worth $950K

rental home: owe $435K, HELOC $178K, now worth $550K

credit cards: $10K

Both homes have been in and out of market for 1 year and not able to sell.

We moved out of the primary home since it is going through foreclosure (8 months behind payment) and currently renting. This home is in the market as a short sale. Tried to to deed in lieu but lender is talking a long time to respond. We want to give this house up.

Rental home finally got rented but short of $500 per month. We are not sure if we want to keep this house and make it primary home when the renters lease ends.

What do you think we should do?

Give up both homes in BK? We did the means test and we dont qualify for a ch 7.

Wait for the foreclosure to end and not file BK?

Our goal is to get rid of our debts and start anew. Pls advise!!!!

[fltoo]

I would try to short sale the primary residence and live in the second home when the lease is up. The good news is, you will not be taxed on the forgiven debt of the primary if you short sell before 2012.

If you walk away from both, a BK would discharge the debt on the houses, but, chances are you will be paying the unsecured debt back at 100%, since it is so nominal.

You have plenty of time to try the short sale since the foreclosure process takes forever these days.

You are not really in that bad of shape financially compared to most if the mortgages are your only debt.

[HHM]

The good news is, you will not be taxed on the forgiven debt of the primary if you short sell before 2012.

That is a tad misleading, not everyone qualifies to have the debt foregiven.

http://www.irs.gov/newsroom/article/0,,id=174034,00.html

Without knowing your income, it is hard to say what your best options are.