Foreclosure by Walking Away

Thanks for all the great info that you guy’s provide. I look through the site on a daily basis and learn something new every time. Here’s my Question; if my house gets foreclosed on what happens to the other types of credit that I have like credit cards? I have excellent credit at this time with cards that have high limits and I live in California, I am thinking of walking away from my upside down cash eating home while I can at least keep a dime in my pocket. Will I still be able to keep my cards to use as long as they are in good standing after a foreclosure?

Saeed

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Hello Saeed,

I’d hate to see anyone ‘walk away’ from their home.  The lender, your neighbors, and your credit report won’t like it either.  There are many solutions to avoid foreclosure and the Broken Credit Blog has a free thirty-minute seminar on the subject titled: How To Avoid Foreclosure 

Saeed, the answer to your question is somewhat complicated.  Check your credit card disclosures to see whether or not they contain a provision for Universal Default.  Additionally, some mortgage loans in California are recourse and some are non-recourse.  A foreclosure on a recourse loan could result in a huge judgment and wage garnishment or a huge IRS tax bill.  On the other hand, the ideal short sale negotiation with your lender may result in walking away scot-free with no negative marks on your credit report.

Thanks for the questions and see you at the seminar!

Paul

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.