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Q. I was wondering what will be the lest damaging to myself and my credit. I realize that unless a miracle happens, I'm screwed but I'm sure some ways will leave me less screwed than others. :) The short version: I have a house I can no longer make payments on, can't sell, and the mortgage company refuses to help. With the idea that I don't want to keep the house, what is my best option? The long version: I have a townhouse that I was renting out to other people. The townhouse was my first house which I bought via FHA. After 5 years I moved out and bought a bigger single family home. Unable to sell it, I began renting it. The first couple were fine, then I got the tents from hell. A series of 3 separate tents in fact, that cost me major money to keep the house fixed up. Sure I kept the deposit and took them to court but people who don't own anything don't fear court judgments. However they will threaten to sue over the littlest of things. Anyways, so after months of sleepless nights and maxed out credit cards, I evicted the last group of tents, put the house up for sale, and vowed to never rent out anything of mine again. However the house isn't selling and I'm offering the bear minimum I can sell it. So I contacted the mortgager Wells Fargo and FHA to activate some anti-forcloser protection. They are refusing to help. 12 weeks of phone calls and I've been given a deaf ear all the way. I've looked into refinancing but there isn't anyway to get the payments down to something I can afford within all my other bills. So now I'm a few weeks late on a payment and it isn't looking like anything is likely to save me. Right now I see 3 things happening. 1. A buyer on a white horse comes riding up to buy the townhouse within the next 45 days. Complete fantasy here 2. I let the bank foreclose on the townhouse. Seems to be the most likely option but is this worse than a bankruptcy? 3. I file for bankruptcy. Put as far as I can tell this option would be only if I wanted to try to keep the townhouse. Which I don't So any suggestions on what to do to make this less painful? Also how bad is foreclose or bankruptcy? I know people that have gotten credit cards and credit within weeks after completing bankruptcy. However I'm not to concerned because the only thing I needed credit cards was ordering online and making repairs to the townhouse that I'm trying to get rid off. If I can't get a gold card for 7 years, I don't have an issue with that. :) My biggest concern is a new car. I did buy a car just last year so I don't need one for awhile but my need for a car will more than likely come up before the 7 years is up..

A. This is for discussion purposes only, and is not legal advice. I'm not a lawyer. If you want legal advice, hire a lawyer and pay for it. A bankuptcy will stay on your record for 10 years. The foreclosure stays for 7 years. So if those were your only options, I'd say let it go to foreclosure. But be aware that if your loan was a refinance, Wells Fargo might still come after you for the deficiency (the difference between what you owe and what they eventually get for the townhouse). If this is the loan you used to buy the townhouse, you're probably OK. If you end up with a foreclosure or bankruptcy on your record, you'll pay a higher interest rate if you go to buy a car on credit or next time you want to get a mortgate to buy real estate (including a house for yourself). A bad credit history can even make it harder to rent an apt. or get a job, as both landlords and some employers are now checking credit histories. If you need to credit card for convenience, you can always get a "secured" card, or you might be able to get a normal one at a higher interest rate -- which won't matter if you always pay off before the due date. But keep in mind that the best deals (lower interest rates, no annual fee, etc.) go to people with near-perfect credit histories. Other options: .. Talk to Consumer Credit Counselors. Sometimes they can work something out with the lender even if you can't. .. See if you can sell the townhouse for a little less than you currently think is your minimum. Even if it sells for less than the loan amount, you might be able to scrape up a little extra money (friends? relatives?) to pay the difference. Or, once you have the money in hand to pay off 90% of the loan, maybe Wells Fargo will decide to accept that ("short sale") rather than pay the expenses of foreclosure and maybe get less than you did in a foreclosure sale. Btw, you'll get more for it if you fix it up from whatever the tenants did -- try to do as much of this with your own labor as you can, professionals charge a lot. .. Write a quitclaim deed to Wells Fargo and register the transfer with your county's office that handles such things. It's called "deed in lieu of foreclosure". WF doesn't have to accept it -- they may deed it right back to you and foreclose. But there's a chance they'll either miss it or decide it's just not worth the trouble. .. Try to find a better tenant. If you get rent coming in you'll be able to make the payments, then you'll avoid the black mark on your credit history. Again, you'll need to fix it up first.

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