This is only true in states with non-recourse loans. Many states have full recourse home loans that would require the homeowners declare bankruptcy to "walk away"
Re:Home Price to Income Ratio
by TedDoesntTalk on Monday September 20, 2021 @11:19PM
(#28601766)
Yeah, and I don’t think bankruptcy disappears from your credit report after 7 years like other items. Does it?
7 years (Chapter 13) or 10 years (Chapter 7).[1]
[1] https://www.lexingtonlaw.com/education/how-to-remove-bankrup...
Bankruptcy does eventually disappear I think, or if it doesn't there are legal requirements not to hold it against you after X years without a problem on your end. It's been a while since I've looked into it.
The irony, of course, is that the US Bankruptcy Code provides you can't declare bankruptcy again until 7 years have passed. So creditors theoretically have less risk during the period they generally refuse credit to the newly bankrupt. Of course none of that applies to business bankruptcy, where the old company is often dissolved but you're often looking to the same former principal(s) for personal guarantees of the new company's obligations.
There are a number of lenders who are willing to extend credit to those with a discharged bankruptcy (on terms far worse than someone with an 810 credit score, of course).
You could always walk away. Better to be under water on a mortgage than own it outright. This is called a strategic default. Lenders know this which is why they require a substantial down payment (typically 20% in the US)
Most people wouldn't do it if they're slightly under water. But eventually many people would consider walking away and taking a hit on their credit score, which get totally wiped out after 7 years anyway.