can i walk away from my mortgaged home and not be liable for it?

Depending on what state you are in, you may be protected. In CA, AZ, WA, OR, NC and MN you can walk away from a primary mortgage without any legal recourse. In instances where you have a HELOC or a junior trust deed, the lender of the Jr. loan my pursue recovery. In states other than the above mentioned states, lenders have the right to pursue a legal judgment against the defaulting homeowner. That said, deficiency judgments are very rare. In most cases, the lender will take the home back as collateral and then write off (cancel) the loss / difference between what is owed and the fair market value of the property at the time of the foreclosure. In this regard, it is highly likely you would receive a IRS earned income form 1099. The 1099 is considered virtual earned income. Presently, there is a law in place to protect the home owner from having to pay the virtual earned income. The law; 2007 mortgage debt relief act, is scheduled to expire at the end of 2012. Presently, there is legislation in place to try and amend the tax forgiveness through 2015. If you elect to “walk away” the strategy would suggest that you stay in the home through out the process and save all of the money that you are not sending the lender. In this regard, at the end of the 12 month period, you should have a healthy financial reserve that you can fall back on. In most cases, you will be renting, so the money saved can be used to cover your rent costs for many months into the future. Once 36 months have passed from the foreclosure, you are eligible to purchase a new home based on FHA guidelines. As far as your credit goes, in most cases, the foreclosure will reduce your credit score by 130 to 180 points. Your credit will usually self heal within 24 to 36 months after the foreclosure.