In times of economic distress, paying a mortgage can be difficult. If you are struggling with an overwhelming mortgage debt, you can take certain legal steps to reduce and even eliminate the balance. It's important to review all possible options before taking action. Some legal steps will have serious consequences on your credit and income.
Liquidate all of your other savings, investment and retirement accounts. This is a drastic measure, but you may be able to seriously reduce, if not completely eliminate, your mortgage balance. Before liquidating any retirement accounts, though, make sure to review the penalties involved--both tax and early withdrawal fees may apply.
Start a biweekly payment schedule. This is a long-term mortgage elimination strategy. By making biweekly payments, you'll end up making 26 half payments each year, or 13 full payments--meaning one additional full payment annually. This, over time, will cut thousands in interest payments and eliminate your mortgage several years early.
Review your mortgage to see if it is assumable. This means that another person can take over the loan without involving a refinance.
Find a new mortgagor (debtor) willing to take on the mortgage burden. Some folks in dire straits use this option and then rent out a room in their old house from the new owner. Contact your mortgage lender to verify an assumable mortgage.
File bankruptcy. In order to fully eliminate your mortgage, you need to file Chapter 7 bankruptcy. This is the Chapter in which your assets will be sold to recoup losses on debts. Any remaining debts not covered by assets will be charged off--including your mortgage. Bankruptcy will remain on your credit for at least seven years.
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