Our bank offered us an option to deed back the house to them, what are the repercussions?

[acdmom]

We tried to refinance our house but since we owe more than what it is worth, we didn't qualify. We then tried to get a "hardship adjustment" due to the fact that I've been unemployed for over 2 yrs, and my husbands child support payment went up significantly. We were denied.
The bank sent us a statement telling us we were denied, but could deed back the house to them. We are now seriously thinking about doing so... what would be the worst situation.

[Huntsman]

Deed in lieu of foreclosure (also called handing back the keys)
All that will happen is that your credit will be ruined for a few years.
No more loans or credit for years to come
Get a bit of savings since you may have to pay a larger deposit to a landlord for a place to live

[Appraiser guy]

You also will get a 1099 and have to pay taxes on the difference between what is owed and what the bank can sell the house for.

[Paul in San Diego]

The worst situation is a foreclosure. The second worst is a short sale (which the bank denied, apparently). You best situation now is the deed in lieu of foreclosure. That's where you sign over the deed to the property to the bank, they terminate your mortgage, and you walk away. This gives you the least damaging hit on your credit report.

Also, check with the bank before you make this move. They may or may not file a 1099 for the difference in what you owe versus what they can get for the property at auction or on the open market. This is important to know, because the 1099 shows that the bank forgave a certain amount of the loan and the IRS would see that as income. So, you would be liable for paying the taxes on that amount and, not knowing that, it could kill you at tax time.

[MightySpecialist249]

I don't have an answer to the deed back, but I noted your comment about child support, and since you do not have email activated, I'm posting this here for you to see.

http://ChildSupportRights.org/WhatPayersNeed2Know
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Federal Child Support Enforcement Handbook for Non-Custodial Parents
http://childsupportrights.org/
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To learn a father's rights, join Dads House Educational Center in Yahoo Groups. It's free to join and access all materials. You also associate with other fathers going through, and have already gone through, the same issues. We have an Educational Manual that teaches everything that needs to be known in addressing your legal issues. Mention your question here when asked why you want to join, as well as your state?
http://groups.yahoo.com/group/Dads_House_Ed_Ctr/
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2nd Wife Club in Yahoo Groups, for those brave enough to take on a man with "baggage".
http://groups.yahoo.com/group/2ndwifeclub/
http://www.facebook.com/proudstepmoms
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For 22 years, I have volunteered my time working with divorced/single fathers dealing in family law issues, such as child support, teaching them about what the states are not telling support obligors.
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