On Mon, 8 Dec 2008, Jordan Hayes wrote:
> I'd say it almost never "makes sense" to walk away from a mortgage.
> You may find yourself forced to do it, but choosing it has deep
> repercussions in the US; it should not be taken lightly. In the example
> of someone who bought a $300k no-money-down house in Merced two years
> ago and sees a 50% haircut today, the impact of walking away is not just
> a huge ding on your credit report, but also a $30-50k tax bill,
> depending on your situation. That's not a "higher-than-seems-worth-it"
> payment, that's a one-time charge due April 15th.
>
> I'd say if you can't afford a $300k mortgage, you sure can't afford a $50k
> tax bill.
That's quite a hit at the conventional wisdom. But I'm confused (renter that I am). Walking away initiates foreclosure proceedings, right? How does that lead to a tax hit? Does everyone who is foreclosed on get a big tax hit on top of it? Seems like like adding injury to injury.
Michael