No one takes out a mortgage thinking they may have difficulty paying it someday, whether due to loss of a job, unexpected medical bills, or other unforeseen issues. But people come to a point where they’re struggling to pay the mortgage. They may try to sell the home, but it’s possible either no one wants to buy it, or the owners may be what’s called “underwater” (or “upside down”) on the mortgage. That means they owe more money on the mortgage than the house is worth. Selling the house at a loss would leave them still in debt, and they’d no longer own a home.

If that situation happens to you, here are some things to know and consider before taking that first step away from the mortgage. It’s a good idea to involve an experienced attorney who understands the complexity of these kinds of issues and who can help you make an informed decision.

What Does It Mean to Walk Away from a Mortgage?

It means that someone stops paying their mortgage and goes into voluntary foreclosure. Usually, foreclosure is something done by the lender that holds the mortgage. The lender starts the foreclosure proceedings to take back the property and evict the owner who’s behind on payments.

Someone walks away from a mortgage for the reasons listed above, but they may also walk away even if they can afford to keep the property but choose not to. That’s a strategic default, which happens when the home is viewed as a bad investment. They may find rental housing that costs less than their mortgage payments.

What Could Happen if I Walk Away from a Mortgage?

While walking away seems like a simple way to get out from under a problematic real estate deal, some consequences must be considered.

Bad credit. Voluntary foreclosure is still foreclosure and will show as a decrease in credit scores.

Difficulty getting credit. People who walk away from a mortgage may find it harder to get credit of any kind, secured or unsecured, in the future. It will likely take at least 2-3 years of responsible credit use before a mortgage lender would consider someone for another mortgage, and it could be even longer.

Is Illinois a Recourse State?

Often a foreclosed home is sold at auction, frequently for less than what was still owed on the mortgage. In some states in the U.S., foreclosure laws maintain that the lender has the right to seek money still owed after the property is sold at auction when there are still amounts due from the mortgage, which is called being a recourse state. Illinois is one of the recourse states. Lenders have the right to pursue those who walked away from their mortgage. That’s why it’s essential to work with an attorney knowledgeable about the ramifications of walking away before deciding to do so.

Let Us Advise You

If you or someone you know needs help understanding foreclosure and bankruptcy issues, call us at 708-575-1500 to work with an attorney experienced in these areas.