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The main difference between foreclosure and deed in lieu is how the process takes place. In a Deed in Lieu the homeowner signs over the title to the bank allowing the bank to take full ownership of the property. In a foreclosure the same thing takes place except the bank is forced to go by the step-by-step process determined by laws in your state.
The foreclosure process is expensive for the bank. Not to mention the amount of time a foreclosure takes to go through. In many cases years go by before the foreclosure is completed keeping the homeowner from moving on and beginning a new chapter in their life. The bank would much rather have you sign over the property so they have total control now. In most cases the bank does not do anything special for you when performing the Deed In Lieu.
After a Foreclosure or Deed In Lieu you will be faced with a Deficiency Judgment, which will come to you in the form of a 1099c. This judgment will be in the amount of loss between where the bank sold your home and what you still owed on your mortgage. In most cases this amount is very big. This being said, How will you pay taxes on such a large amount? This might even force you to a higher tax bracket.
Keep in mind that after you are finished with getting foreclosed upon the public record will remain for up to 10 years. This can prevent you from getting out from under your past house problem.
Lastly, many occupations will revoke your security clearance if you have gone through a foreclosure or deed in lieu. Often times this results in loss of employment.