Hello Alma. There are a lot of issues that need to be addressed before making a decision on how to proceed. There is not a one size fits all answer. To be able to get the right answer to your situation, I suggest that you talk to your accountant or to a tax and real estate attorney. A real estate & tax attorney would be best to advice you whether it would be beneficial to do a loan modification, short sale or foreclose on the property and what your potential tax or liabilities would be in the choice you make.

E-mail me, I know a lawyer who specializes in Real Estate and Taxation should you need a referral. Make an informed decision only after knowing your potential liabilities and consequences.

Or go to http://www.MakingHomeAffordable.gov to research more answers to see if you qualify for the Pres. Obama program. You could get free counseling by calling the Hope Hotline.

Wow, you have a lot on your plate right now, so first take a breath. Your first step is to try to modify your loan and make your payments more affordable so you can keep your house. Before calling your lender take the time to make a balance sheet. When you call the bank they are going to connect you to a loan modification department and they will ask lots of questions so be ready. Know your monthly income and your month expenses. these expenses will include food, car loan, student loan, credit card payments (monthly minimums), your mortgage, gas, medical, child car, clothing, insurance...go thru your monthly bill paying and have this handy. After this review you will find out if you quality. With all the government awareness and assistance now is the time to be proactive.
If you do not qualify for a loan modification and you are really underwater, consider a short sale. Ithese are tough and long but you don't want to be in denial. Living off your credit cards is no way to live. If short sale or foreclosure are your only choices, you should find out if you have recourse loans and you should discuss options with your tax advisor as all of the above have tax implications you need to be aware of. Your local realtor will also be able to guide you and help.

Hi Alma,

Call a local real estate attorney and find out the laws for California, since they can vary from state to state.
You will want to know if the 1st and 2nd lien holders have any recourse if not paid in full.
Contact your banks ask for the loss mitigation department, explain your cirumstances and see if they can do any kind of loan modifications for you.
The problem that most homeowners are facing is that the banks have anywhere from 500 to 5000 new short sales a week, making if time consuming to get help.
You have options, email me if you would like more information.
Best Regards,
Cindy Korstad
cindykorstad@gmail.com

Alma, before considering foreclosure, you should first call your bank(s) and ask if they will give you a loan modification. New rules in CA passed in September should make a loan modification easier to obtain than it was in prior months.

Also, be sure to take a look at all of your expenses and do some serious budget-cutting. Even little items like a daily Starbucks can add up to big numbers at the end of the month. If you don't have accurate records of your spending, start now to write down everything you spend so you can see where can cut expenses.

Good luck!

Linda

I'm not a financial counselor and am not giving professional advice. This is just my opinion. Only a professional who has seen your entire financial picture can give accurate advice.

Odds are you should STOP servicing bad debt by adding more debt (students loans and CCs). You're just digging a bigger hole. If you're really 1/4 million or so underwater it doesn't sound too promising that this will turn around. If foreclosure/deed in lieu/short sale appears inevitable, might as well start the credit clock earlier than later (all 3 have equal impact on your FICO) rather than hold out another 9 months, accumulating a ton of credit card debt and face the same result. A foreclosure now is better than a foreclosure in 12 months with another $10K of CC debt on top of it all.

You really should speak with a professional. But supplementing income via 10%-18% credit cards to cover a home you're $250,000 upside-down on sounds like a really, really bad course to continue.