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To Stay or Walk Away: Deciding (Not) to Abandon a House with No Equity

Chances are you’ve already given this matter serious thought. Caused in large part by the steep decline in home values over the last few years, many people find themselves in a situation where their mortgage or the combined amount of their mortgages is greater than the value of their house or condominium. This scenario is sometimes referred to as being “underwater.” As a result, they have no equity in their property, despite making payments for years. Today, approximately 11 million homeowners find themselves underwater.

Deciding to stay and wait out the recession or leave a home is a painful decision to make. There are many reasons for staying. Probably first and foremost is that you’ve invested so much time and energy, not to mention money, into your home, deciding to leave becomes an emotional decision that overpowers any logic telling you something to the contrary.

No matter how much logic I throw at you, I probably won’t be able to convince you to walk away from your home. Therefore, I’ll let others do the talking for me. In a NY Times article from April 2009, real estate forecasters predicted that underwater home owners probably won’t see any equity in their homes until at least 2017. Though the article focused on the New York City metropolitan area, the data referred to nationwide trends. In a recent survey conducted by and, people were asked if they would walk away from their homes if they were unable to make the mortgage payments. Only 41% of respondents said they would consider walking away. On the flip side, 59% stated that they would not walk away under any circumstances. Trulia’s CEO, Pete Flint, said, “[f]or every borrower who avoided foreclosure through HAMP last year, another 10 families lost their homes.” He added, “It now seems clear that government programs will not reach the overwhelming majority of homeowners in trouble.” You can read the full article at

In an era when commercial borrowers routinely default on mortgage payments and unscrupulous lenders push all kinds of ethically ambiguous mortgages on people for a quick profit, homeowners still feel a moral obligation to make payments on their mortgages, even when they cannot afford to do so. There are alternatives to foreclosure, though. It may even be possible to keep your house. One such alternative is a chapter 13 bankruptcy, which allows you to discharge unsecured debt, thereby freeing up income for mortgage payments. You should consult with an attorney to determine if you are a candidate for chapter 13 relief.

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