Thousands of people are walking away, literally abandoning their homes, because of foreclosure. Many people are also making monetary decisions, because they are upside-down on their mortgages, to simply stop paying their mortgages and property taxes - even when they can afford to pay. These latter homeowners are headed for foreclosure because they chose a path to a "strategic default".

By walking away from what will become a foreclosure, these homeowners are actually creating a larger problem for themselves in the future. The foreclosure will bring with it severe credit damage and likely a deficiency judgment that will follow the homeowner for many years. To avoid these deficiency judgments, some homeowners have been counseled to file bankruptcy. Bankruptcy stays on the homeowner's credit report for 10 years and on his public record information for up to 20 years. This may not even be an option at all for a person with assets.

Some professions will not allow a member or employee to have a foreclosure filing or a bankruptcy in their personal history. Typically, larger CPA firms and companies that deal directly with finances of customers or their portfolios are also included. Military clearances may be reduced or eliminated because of a foreclosure filing or a bankruptcy. There are solutions to these problems as you will see. Here are 12 reasons for not just walking away from your foreclosure:

(1) Bankruptcy - Using a bankruptcy to get rid of a deficiency judgment creates long lasting damage to your credit history - usually 10 years. The actual bankruptcy proceeding, however, stays in the public record for up to 20 years.

Solution - Short sales are not reported on credit history, only any late mortgage payments are shown. The loan itself is shown as "Paid Less Than Owed or Settled". A bankruptcy should only be used when you have additional debts that can't be repaid or re-negotiated. Re-negotiation by lenders is very common instead of losing all their receivables to bankruptcy.

(2) Credit History - Foreclosure remains in public record for 10 years or more if creditor doesn't ask to have it removed.

Solution - Short sales are not reported on credit history, only any late mortgage payments are shown. The loan itself is shown as "Paid Less Than Owed or Settled".

(3) Credit Score - Your credit score is also affected by non-payment of mortgage and other bills, but expect a 200 - 300 point reduction as typical for 3 to 5 years.

Solution - Only late mortgage payments will show after completion of a short sale and this could be a 50 - 75 point reduction if other creditors are kept current with this reduction lasting one to two years.

(4) Deficiency Judgment - Depending on the state where the property is held, lenders have a right to pursue a deficiency judgment. The strategy lenders have been using is to file away the judgments and come back after the homeowners in 3 - 5 years!

Solution - The main purpose of any short sale is to get the lender to not pursue a deficiency judgment. This will always be known before the closing of the short sale from the legal documents that must be carefully reviewed to make sure there is no deficiency judgment applied for.

(5) Employment -Employers have the right to screen new applicants and current employees' credit history. This is especially true where fiduciary duties are involved by the employee. Foreclosure can be grounds for dismissal or not being hired.

Solution - Short sales are not reported as short sales on credit reports or credit histories and should not be an issue as a condition of employment.

(6) Future Loans of Any Type -Once your credit report shows a foreclosure, future lenders for car loans to furniture purchases will charge a higher interest rate and over time this will be a lot of unnecessary money out of your pocket.

Solution - Short sales are not reported as short sales on credit history, only any late mortgage payments are shown. The loan itself is shown as "Paid Less Than Owed or Settled".

(7) Keys for Cash Program -Homeowner will very seldom receive any money for leaving the premises and more likely will be legally evicted.

Solution - While the Keys for Cash Programs come and go with lenders, the short sale negotiator should try for cash to the seller at the closing. Property usually must be "broom swept" by seller, appliances intact and the homeowner must have some personal hardship or need to qualify.

(8) New Home Purchase with FNMA as insurer of an Investment Property - Property owner is ineligible for a FNMA backed loan for 7 years after foreclosure.

Solution - Property owner may be eligible for a FNMA backed loan 2 years after completion of a short sale.

(9) New Home Purchase - FNMA insured green trust cash unsecured personal loans bad credit monthly payments and home as Primary Residence (If mortgage payments are being paid timely) - Homeowner is ineligible for a FNMA backed loan for 5 years after foreclosure

Solution - If mortgage payments are made during the short sale, a homeowner is eligible 30 days after completion of a short sale for another loan if previous lender forgives the deficit due on their loan.

(10) New Home Purchase - Property Owner is ineligible for a Freddie Mac backed green trust cash next day bad credit loans for 7 years after foreclosure.

Solution - a Freddie Mac backed green trust cash bad credit loans lenders only for Investment Property (not Non-Primary residence) - Property owner is eligible for a Freddie Mac backed loan after a short sale 2 years after completion of the short sale.

(11) New Home Purchase - FHA - Homeowner is ineligible for FHA backed loan for 5 years after foreclosure.

Solution - If mortgage payments are made during the short sale, homeowner is immediately eligible for another loan if previous lender forgives the deficit due on their loan.

(12) Security Clearance - Outside of an on-the-job misdemeanor or felony, foreclosure is the most serious problem for retaining or achieving a security clearance and can even result in job loss.

Solution - Short sales are not reported on credit reports as a short sale and are the least challenging of security issues.

In summary, there are solutions to the devastating effects of just walking away from a foreclosure. In the above examples, simply doing a short sale will minimize or eliminate the harmful impact of a foreclosure or bankruptcy proceeding. A little extra effort by a homeowner can result in a gigantic difference in the ultimate harmfulness of a foreclosure action.

Some lenders may want a personal note signed at the closing for an amount they determine as the shortfall from the mortgage balance and what they received at closing. These personal notes should be considered as a viable alternative for homeowners as their "status" in the credit hierarchy is not much more than a credit card.

Dave Dinkel has over 40 years experience in Real Estate Investing which has given him a unique perspective into the Real Estate Market. Learn the "No Money, No Credit, No Risk" proven methods of today's successful Real Estate Investors. Visit America's Online Real Estate Investing Association created by Dave Dinkel to get you started as a Real Estate Investor today! Click the link Now http://www.AOREIA.com