The "Crash and Burn" part is losing all to foreclosure. After the fire cools and you take stock of the wreckage, you determine what's left. Your home is gone. Your credit scores have plummeted as much as 280 points. Your job could be at risk. Some employers will not consider a new hire with a damaged credit history. If you are employed by the government you may lose your security clearance. You lose the ability to buy anything at a "good" interest rate. You will need 7 to 10 years to recreate your credit history before you can borrow money at the best interest rate.
I won't even discuss the potential income tax implications. You need to discuss those possibilities with your accountant or lawyer. You may owe the IRS money even though you lost your home. The relief of debt you received when the bank foreclosed could be considered taxable earned income. The amount of the taxable income is calculated by subtracting the amount you still owed to your lender for the home purchase(mortgage or trust deed) less the amount the home sells for. There are circumstances that will alter the amount that is owed. And you must speak with your accountant and/or lawyer about how you may not owe anything.
With all of these negative issues is foreclosure the best option to your financial problems. Certainly you won't be paying on your mortgage anymore. However you do have to live somewhere. As you were being evicted from your home at the end of the foreclosure process you began looking to rent something. The landlord or realtor representing the owner asks you to fill out a rental application. Landlords ask for a credit report, and yours now shows the foreclosure. The damaged report may not be acceptable to the owner, or he/she will require a higher rental fee. Just like applying for insurance, any pre-exiting problem or any accident will equate to a higher premium payment. Your credit report had a huge accident and your FICO scores have fallen as much as 300 points. You are now considered a risk.. You aren't handed a "get out of jail free" card when you go through a foreclosure. Carefully consider the options before you submit to a foreclosure.
You will have serious consequences when going through a foreclosure. How ever there are alternatives to the foreclosure process.
1. Loan Re-modification
2. Deed in-lieu-of foreclosure
3. SHORT SALE
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