closed credit cards after foreclosure,short sale of deed in lieu

[Anonymous]

okay community please help. i am needing to either foreclose or try to short sale my home. i have really great credit and mutiple credit cards. I am wanting to know if the banks will automtically close all ,any, or most of my accounts if I foreclose or short sale. my score is in the low 800s. 

i only have 15 grand in cc debt which i manage well,but my house in this neighborhood is not at all worth what i owe and the neighborhood is now awful and the school district is bad and not safe for my 7th grade child. I have alot of repairs to make and even with repairs I still don't see it selling. I dont want to ruin my credit and lose my credit cards,but i give up. please tell me from your experiences what I can expect.I am so afraid!

[Gmood1]

Would it be possible to rent it until you figure out which way to go?
When my home foreclosed. Capital one did nothing while Chase lowered my limit, but didn't close the card.
So there's hope you'll still retain your cards. Which will help rebuild your credit in the future.
I'd certainly try to rent the home out if possible. Try all of your options before throwing in the towel.

The foreclosure will stay with you for a long time. It will take years to recover. I have just a few more months before mine finally drops off of EQ and TU.

Some times things seem hopeless when in fact you may already have a solution.
Just think long and hard before proceeding.

[Marcos8]

Are you currently on time with your mortgage and all other accounts? I went through a short sale where the only account that was late was a 30 day on my second mortgage. Everything else was current and never went delinquent. I would do my best to pay down the revolving debt as best as you can now... And then keep your utilization down. After my short sale my first mortgage accepted the terms and took a reduced amount and just closed the account as settled for less than full balance. My second mortgage accepted the terms of the short sale and allowed the closing to proceed...BUT after the closing they contacted me about paying the remaining balance ( they are allowed to do this depending on your state). I negotiated the remaining balance to 30-40% of what was owed and made payments over the next few months until the agreed upon amount was paid. At that point they closed the account as settled for less than full amount. If I didn't get on that payment plan I could have legally been sent to collections for the difference. I prevented this by negotiating a payoff balance. I have no collections on my report of any kind because of this and that has helped me tremendously. 

None of my credit cards ever took any adverse action against me since they were all paid on time although I am sure all of my CC companies saw the 2 very large settlements/charge offs on my credit reports. If they were to get spooked they could have taken adverse action against me but they didnt. That's why it's important to to get your CC debt reduced now...so when the forclosure or the short sale hit your report you have not given the CC companies much to be scared about. 

Your credit score will go down no matter what. But things will be a lot worse if you forclose/short sale and then start to get balance chased at the same time by your credit cards. Ultimately no one can tell you for sure what your other creditors will do though. You just don't want to give anyone else an excuse to think you are a liability in paying  your outstanding debts. 

Make sure you check the laws for your state because like I said you may be on the hook for the difference in a short sale which will lead to not only derogatory info on your credit report from the short sale but also from a subsequent collection placed on you for the difference that will continue to update until satisfied. But never under any circumstances let any other account go delinquent during this time because you will need these other open/ non delinquent accounts to fuel your rebuild.  

[NRB525]

---

@Anonymous wrote:

okay community please help. i am needing to either foreclose or try to short sale my home. i have really great credit and mutiple credit cards. I am wanting to know if the banks will automtically close all ,any, or most of my accounts if I foreclose or short sale. my score is in the low 800s. 

i only have 15 grand in cc debt which i manage well,but my house in this neighborhood is not at all worth what i owe and the neighborhood is now awful and the school district is bad and not safe for my 7th grade child. I have alot of repairs to make and even with repairs I still don't see it selling. I dont want to ruin my credit and lose my credit cards,but i give up. please tell me from your experiences what I can expect.I am so afraid!

---

Can you list which cards you have, and what the credit line is, what you owe on each? The reason for the question is, some banks are more likely to not be spooked by a change in your reports, other banks might (not certainly, just might) have some reaction. Capital One, for example, seems to be unlikely to let something like this cause issues, Barclays on the other hand might (might) have a concern.

The other major factor to understand is, how your state regulates forclosure. States like Florida require a court approved foreclosure ruling, but the ruling might include reporting the unrecovered loan funds as income to you. In states like Washington, where it is an administrative procedure with no recourse, the foreclosure is just no more debt, there is no income tax consequence. I would suggest understanding the recourse / no recourse situation should be first on your list of concerns.

[Marcos8]

---

@NRB525 wrote:

---

@Anonymous wrote:

okay community please help. i am needing to either foreclose or try to short sale my home. i have really great credit and mutiple credit cards. I am wanting to know if the banks will automtically close all ,any, or most of my accounts if I foreclose or short sale. my score is in the low 800s. 

i only have 15 grand in cc debt which i manage well,but my house in this neighborhood is not at all worth what i owe and the neighborhood is now awful and the school district is bad and not safe for my 7th grade child. I have alot of repairs to make and even with repairs I still don't see it selling. I dont want to ruin my credit and lose my credit cards,but i give up. please tell me from your experiences what I can expect.I am so afraid!

---

Can you list which cards you have, and what the credit line is, what you owe on each? The reason for the question is, some banks are more likely to not be spooked by a change in your reports, other banks might (not certainly, just might) have some reaction. Capital One, for example, seems to be unlikely to let something like this cause issues, Barclays on the other hand might (might) have a concern.

The other major factor to understand is, how your state regulates forclosure. States like Florida require a court approved foreclosure ruling, but the ruling might include reporting the unrecovered loan funds as income to you. In states like Washington, where it is an administrative procedure with no recourse, the foreclosure is just no more debt, there is no income tax consequence. I would suggest understanding the recourse / no recourse situation should be first on your list of concerns.

---

Totally agree with this. When I did my short sale it was in the middle of the whole financial crisis and there was a period of a few years where the government protected people from being taxed on the discharged debt. That period to my understanding is over and you can potentially be issued a 1099 on the discharged debt and be expected to pay taxes on it as it would technically be considered a form of income. You have to find all this out. 

[Anonymous]

Thank you so very much for the information. I guess now I need to search for a real estate agent.

[jeffery581]

Rent it out. It would not be a permanent thing but it could work out really great in a few years. Rent an apt. temp. (I know its not pleasant but itd cheaper housing).

[Anonymous]

Yes I will list my accounts for you. I'm wondering who will close or reduce limits based on a short sale. 

US Bank visa 16200,   American Express Optima 5100,   American Eagle visa (Synchrony) 4500,  ATT universal visa 26530,  Barclays mastercard 8500,  BP gas visa (Synchrony) 6000,  Capital One visa 2500,   Chase Freedom visa Signature 34400,   Dicks Sporting Goods mastercard (Synchrony) 7500,   Discover platinum 5500,   Discover IT 5000,   DSW visa (Comenity Bank) 6500,   Fuel Rewards mastercard (Comenity Bank) 8000,   Overstock mastercard (First National Bank of Omaha) 4100,   HSN mastercard (Comenity Bank) 2750,   Meijer mastercard (Comenity Bank) 7500,   Orbitz mastercard (Comenity Bank),   Saks Fifth Avenue mastercard (Capital One) 7900,  Sears mastercard (Citibank)  6000,   Stein Mart mastercard (Synchrony) 4500,   US Bank plat visa 3000,   I also have 2 additional  visa cards from credit unions that are located where I live.

[Anonymous]

I have what is likley a dumb question -- how would the other creditors know about the foreclosure / short sale / settlement?  I realize they do credit reviews every so often but, how often is this done?  Or, do all of ones creditors get an alert when a negative items hits a report?  

[romeo]

Do not go through with a foreclosure or deed in lieu. Also do not make any repairs if you are looking at a short sale option as there is no benefit in doing so.  You are essentially putting money into the house so that the bank can get more money. You, as the seller, are not allowed to profit from a short sale regardless of whether or not you did any repairs. With a short sale, you will still have the ability to control the process and usually is the best option for people underwater.

It's important to get a good agent who has experience negotiating short sales.  As previously mentioned, there's what's called a deficiency clause in some short sale approvals (not all). This means that the lender can come after you for the difference of what you owed at a later date.  What a good agent will be able to do is negotiate that clause out of the approval to make sure you walk away free from any further debt.  The buyer may have to cough up some more money to sway the bank but it can be done.  Another thing would be to ask for a relocation fee, it can be as much as $10,000 if it's negotiated with the bank. These are some of the many things an experienced agent will be able to do for you. 

As far as a 1099 being issued, it is for the cancellation of the debt.  You will be responsible to pay the taxes on that amount but as mentioned YMMV.

Just curious, what state are you in?