Minnesota Foreclosures

[Mike]

Hello I don't know if I am posting this in the right section or not, but here's my situation.

I own a rental property in Minnesota that I purchased on a contruction loan individually then had to acording to the terms of the contruction loan re-finance it at which time I qualified for the loan individually and my wife just signed the mortgage, not the note.

There was no cash out - it was just a straight re-fi. At the time there was a 10% equity position which put us into a 80/10 mortgage.

We have been renting the house with a rent-to-own option but the renters want out. We are current with the payments, but just found out that the houses are selling for $100K less than what we paid.

We don't want to short sale it because we can't afford the 1099 on that kind of money. So we are looking into foreclosure as a last resort. Please help.

What kind of tax troubles are we facing? Can they come after my 401K assets or anything like that? Can they come after my wife or any of her assets since she didn't qualify for the mortgage?

Any help you can give would be greatly appreciated we are desperate.

Thank you