If you're upside down on your home mortgage, don't be afraid of losing your house. It could be the best thing to happen to you. [Bankrate]
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Note that this article is written by a bankruptcy attorney, and so it's a given that you *should* declare bankruptcy. That's not always wise advise. YMMV.
@mantari: Not so fast. Take a look at the first "Read More" link above. Don't forget the tax consequences of debt forgiveness. In this situation, a bankrupt family will end up with quite a bit of taxable income in the form of forgiven debt.
@knave77: Fortunately for the bankrupt, that is incorrect. 26 USC 108 (the law that you refer to) (a)(1)(A) specifically exempts debts that are discharged as a result of a "title 11 case." Title 11 is the U.S. bankruptcy law.
"Exclusion from gross income - In general
Gross income does not include any amount which (but for this subsection) would be includible in gross income by reason of the discharge (in whole or in part) of indebtedness of the taxpayer if--
the discharge occurs in a title 11 case[.]"
Article read. Sound advice. (And it tells when TO keep your home.)