Foreclosure in our future

Me and my wife bought a house in late 05, right at the peak of the Tampa housing surge. We probably shouldnt have purchased a house at this time, but we had just got married and needed a place we could live together. We thought it was a great deal after all the junk we looked at. The house is only 6 years old, and we paid about $240k for it. We didnt have much for savings and ended up doing 100% financing with an 80/20 loan. In the last few years weve watched our investment slide to what we predict is probably a $60 (or more) loss in the value of our home. To make matters worse, we are both self employed. With the economy going south, weve both seen dramatic losses in our income. Were struggling each month to make ends meet. We dont go out anymore, we gave home-made gifts for xmas, and weve cut whatever corners we can. Its just not enough. Were hoping it springs back, but theres no definite outline as to when. Heres the question. My father is very money wise. He says hes been following the market and watching all of the financial advisors on the news channels say that I should let my house go. He says that I should let the house go into foreclosure, and live in it until they kick us out. Ive heard that it can take up to a year to come to that point. In that time he says Ill have saved up a significant amount and I can buy a house contract-for-deed or something. He says that Im basically just throwing my money into the garbage each month paying for this house. Now, the other side. My wife completely disagrees and will not even entertain the idea. We were about 3-4 months behind on the house and worked out a deal with the bank that they will forgive our late payments as long as we can start paying again. This does absolutely nothing for us in terms of making the payments more affordable, but does give us some time. I feel like staying here is just delaying the inevitable and we will lose it anyways, just with less money in our pockets afterwards. Should I let the house go back, declare bankruptcy, or what?
      Answer1:ForeclosureYou will destroy your credit.No bank will touch you.Lending it getting harder.Banks dont want to lend money at a risk.
      Answer2:Couple of things here: Im not sure that you should be thinking of your home as your "investment". If its lost value in the last few years, the idea is that this is still your Home and provides a safe, secure place to live. Not to mention a tax write-off. So you kinda need to think long-term on that.That said, if you cannot afford your mortgage right now, then you need to figure out what else you can do to get through this time so you can afford it. Everyone is struggling and self-employment is incredibly difficult. I understand (believe me). Work some more with the bank and try to come up with a better solution. There are also government programs out there that may help you figure out a way to keep your home.I have a friend who just moved out of her house (her husband stopped making house payments and they are now getting a divorce) and it was pretty awful for her sitting around and waiting for foreclosure. Can you short-sell your house maybe? Have you talked to a Real Estate Agent about that possibility?I understand that your father is trying to give you very practical advice. I dont know, though. It seems like you have to decide if "practical" trumps "taking responsibility" in this case. Wait until you feel like youve really exhausted every other possibility before you walk away from that house. Take a look at this (not comprehensive) list of options: http://www.citifinancial.com/customerser...