Q: I am elderly and got involved with a rental property with the help of a family member. Now the family member is nowhere in sight, the tenant left and the mortgage is underwater. I don’t have the energy or desire to deal with it. I am on Social Security and living check to check. I can’t afford the payments, and the collections calls are raising my blood pressure. What can I do? – Anonymous

A: Rather than give you the standard advice about trying to complete a short sale, I will ask you to think about bankruptcy. More seniors are turning to bankruptcy relief to deal with monetary problems from bad investments to just having to live on a fixed income in a bad economy. In a situation such as yours, a Chapter 7 bankruptcy can be a great idea. You would have to turn over your non-exempt assets to the court. But it doesn’t sound as if you have any assets to lose, and your home generally is not something that you will lose in bankruptcy. The court will tell your creditors to stop calling you, and at the completion of your bankruptcy case you will not owe any of your lenders anything. The bank will get back the investment property, and you will not be responsible for the difference. A simple Chapter 7 bankruptcy typically costs less than $2,000, and it will take about four months to complete. Afterward, you’ll be rid of all this aggravation.

Q: We have to move out of our house because of a structural defect. Our plan is to get a new mortgage from a different lender for a new home and then deed back the existing property to our current lender. Will this work, and what are the ramifications? – Doris

A: I doubt that your plan will work. When you try to get a new mortgage, your new lender will give you a loan only if your income is sufficient to cover payments on your new house AND your old house. In order for your new lender to not count the payments from your old house, the old house will have to be rented for a year and you will need to provide proof of payments from the tenant for that year. Even after this part is resolved, you can’t simply deed the property back to the bank because it needs to accept it as part of a deed in lieu of foreclosure. The bank may not want to do this for the very reason that you don’t want the house. Once you stop making payments, your credit will take a hit, so getting a new loan will be difficult. You may need to get used to the idea of renting for several years before you buy your next home.

Q: I am interested in trying to buy a bank-owned condominium. How do I make contact with someone in order to see these properties? – Mike

A: There are some websites that you can peruse, such as Fannie Mae’s www.homepath.com. But the easiest way is to hire a real estate agent. Most agents will work with you for no out-of-pocket costs because they get paid by the seller at the closing of your deal. The guidance and experience of a good agent can make a big difference. But before you hire anyone, interview several, and ask a lot of questions about their qualifications and experience. You may even want to speak with some of their former clients.

The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed, nor should any such relationship be implied. Nothing on this blog is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.

To follow Gary Singer on Twitter, click here.