From a financial point of view, it makes sense to give up on the home. After all, paying $143,000 in principal plus interest over the years will add up to far more than the value of the home. If you do surrender the home, it will be foreclosed on at some point. When the foreclosure takes place, there will probably be a deficiency balance owed to the first mortgage holder (the deficiency balance is the amount still owed on the mortgage after the sale) plus the entire second mortgage.
If you want, you can prevent being responsible for any deficiency balance by filing bankruptcy prior to, or even after, the foreclosure. You can surrender the home and not worry about owing on those deficiency balances. The added advantage of filing bankruptcy is that it can allow significant time to remain in the home without having to pay your monthly mortgage payment . . . although that depends on state law.
The decision on whether to file bankruptcy also depends on other assets and debts you may have, which have not been disclosed. The question of whether to file Ch. 7 or 13 is also a good one. If you are giving up the home, chances are that Chapter 7 is the way to go. Generally, Chapter 7 discharges your unsecured debts. In Chapter 13, you agree to pay your creditors over a period of time of up to five years. There are many differences between the two chapters, a reputable local attorney should be able to guide you appropriately on that question.
If you live in Kansas or Missouri and find yourself in a similar situation, pick up the phone and call Neil today for a free consultation at (816) 561-1818.