What Happens If I Walk Away From My House in Indiana?
Walking away from a house sounds simple — stop paying, leave the keys, move on. But in Indiana, the legal and financial consequences of abandoning a mortgaged property follow you long after you drive away. Before you make that decision, you need to understand exactly what happens next — and what your alternatives are.
Call (317) 495-3440 — Free ConsultationWalking away does not erase the debt — Indiana lenders can pursue deficiency judgments, wage garnishment, and bank levies after the sheriff sale.
What 'Walking Away' Actually Means Legally
Walking away — sometimes called 'strategic default' or 'jingle mail' — means you stop making mortgage payments and vacate the property without formally resolving the debt. You are not released from the mortgage simply by leaving. The lender still holds a lien on the property and a legal claim against you personally for the debt. Indiana is a judicial foreclosure state, which means the lender must sue you in court to take the property. That process takes time — typically 12–18 months in Marion County — but it will happen, and you will be named as a defendant.
The Foreclosure Lawsuit and Default Judgment
After you stop paying, your servicer will eventually file a foreclosure complaint in the county circuit or superior court. You will be served with the lawsuit. If you have already vacated and do not respond, the court enters a default judgment against you. That judgment does two things: it authorizes the sale of the property at sheriff sale, and it establishes the total amount you owe. The judgment becomes a matter of public record and can affect your ability to rent, borrow, or obtain employment that requires a background check.
Deficiency Judgment: The Debt That Follows You
Here is the consequence most people who walk away do not anticipate. Under IC 32-29-7-11, Indiana courts can enter a deficiency judgment against you for the difference between what the property sells for at sheriff sale and what you owed on the mortgage. If your home sells for $120,000 at auction but you owed $160,000, the lender can pursue you for the $40,000 difference — plus attorney fees and court costs. A deficiency judgment can be used to garnish wages, levy bank accounts, and place liens on other property you own. It does not disappear when you move out of state.
Credit Damage: Seven Years of Consequences
Each missed payment is reported to the credit bureaus after 30 days. A completed foreclosure remains on your credit report for seven years from the date of the first missed payment. The impact is severe — a foreclosure can drop a good credit score by 100–150 points or more. During those seven years, you will face difficulty qualifying for a new mortgage, renting an apartment (many landlords screen for foreclosures), obtaining certain types of employment, and qualifying for competitive interest rates on auto loans and credit cards.
Tax Liability: Canceled Debt Income
If your lender forgives any portion of the debt — either through a short sale, deed in lieu, or after a deficiency judgment is settled — the IRS may treat the forgiven amount as taxable income. This is called cancellation of debt (COD) income. Depending on your situation, you could owe federal income taxes on tens of thousands of dollars of forgiven debt. There are exceptions — the Mortgage Forgiveness Debt Relief Act has been extended periodically, and insolvency exclusions may apply — but you need to consult a tax professional before assuming you are protected.
The Property Does Not Disappear From Your Name Immediately
Many homeowners assume that once they leave, the property is no longer their problem. That is not true. Until the sheriff sale is completed and the deed transfers, you remain the legal owner of record. That means you are still responsible for property taxes, HOA dues, code violations, and any liability that arises on the property. If someone is injured on a vacant property you own, you can be held liable. Municipalities can issue fines for unmaintained vacant properties, and those fines can become liens that follow the title.
Smarter Alternatives to Walking Away
In almost every situation, there is a better path than abandonment. Selling the property — even quickly, even for less than you owe — gives you control over the outcome. A cash sale before the sheriff sale can eliminate the deficiency, stop the foreclosure, protect your credit from a completed foreclosure notation, and put money in your pocket if there is any equity. Even if you are underwater, a negotiated short sale or deed in lieu of foreclosure is typically less damaging than a completed foreclosure and abandonment. Bartolini Cash Buyers evaluates properties in any condition, in any stage of foreclosure, and can often close in days — giving you a clean exit before the courthouse steps.
Indiana Legal References
The following Indiana statutes are referenced on this page. Links go directly to the Indiana General Assembly website.
- IC 32-29-7-11 — Deficiency Judgment Authority in Indiana
- IC 32-29-7-7 — No Post-Sale Redemption Right
- IC 32-30-10.5 — Indiana Pre-Foreclosure Notice Requirements
- IC 32-29-7 — Indiana Mortgage Foreclosure Chapter
- Indiana Department of Financial Institutions — Foreclosure Prevention Resources
- HUD-Approved Housing Counseling Agencies
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