What can I do to protect myself if she just walks away and makes no effort to sell?

It depends on the state law where the real property is located. If you live in Arizona then I will be happy to meet with you for an hour to discuss the issues related to: working with the lender: short sales, loan modification, and deeds in lieu. Then, as related to Arizona law, the trustee's sale (foreclosure process), and deficiency, what assets are protected if a lender sues you. I will give you a flow chart dealing with deficiency issues, a list of exempt property, the Short Sale Advisory from the Arizona Department of Revenue, and a copy of the Mortgage Forgiveness Tax Debt of 2007. We will also talk briefly about issues related to homeowner's association, credit and insurance. Lastly, we will spend a moment explaining the tax consequences of short sales and foreclosure. I am not a tax expert, therefore you will be provided the names of 2 certified tax specialists. It is very important that you meet with them to discuss the taxes issues in more depth. You may find that tax consequences may influence your decision more than the other reason that you believe is important today. I cannot, nor can anyone, predict the exact credit consequences as it relates to some future lender deciding how any one of the events listed above will affect your future credit. Nor, can I predict the length of time it will take for the lender to respond to or complete whatever legal action they may choose. What I will do is detail the time frames set forth in the Arizona statutes as related to trustee's sales. This meeting must be done in person. It normally takes the full hour to review all of these issues. My fee is $200 for the hour meeting. In order to prepare for this meeting you will need the following: 1) The current fair market value of the property (what would it sell for in today's market). 2) The proximate amount(s) owed to each lender(s). 3) Whether or not the loans are the original purchase money loans. I will explain this more at the meeting. 4) Who was the borrower on the original loan(s). 5) Who holds title at this time. 6) Has a trustee's sale (foreclosure) been started? 7) Have you signed any documents such as short sale, deed in lieu or loan modifications? 8) Bring a list of your questions. My experience is that I cover at least 90% of your questions in my presentation, but it is helpful to know what is important to you. If you want to schedule the meeting call so that we can coordinate our schedules.

If the lender knew that you weren't residing in the property, there is a possibility they could pursue you for a deficiency, if one exists after the foreclosure sale. The general rule in Washington is that we are a non-recourse state which means if the lender elects a non-judicial foreclosure ( which they all do) then the lender only gets the property. However, depending on how rapacious this lender is, they could try to come after you. Time will tell., and I think you could have defenses. A foreclosure will effect your credit in any event.