<prompt> Human: So I have a predicament. The family and I recently moved states as I got a better job. Bought a new house with some saved up cash and started trying to sell the old one. Its in a depressed market and we were 5 years into a 30 year mortgage. As such, its underwater. Had a short sale offer, but bank wanted excess in my opinion contribution. After showing our finances to them they decreased their offer. We can pay the offer, but it would eliminate all emergency fund weve built up in the last 6 months. We own our cars, have no credit card or other debt besides the mortgage on the new house. Credit score in high 700s or low 800s, depending on the agency.So. Take a foreclosure and hit the credit for 7 years or live without an emergency fund or any savings?Assistant: Thats what the emergency fund is there for, right? Financial emergencies? Itll only be another 6 mos. before you get it built up again. Human: But my question is really deeper than that; is this a financial emergency? If I walk from the old house, I lose nothing at the current house. I dont see a need in the next 3-5 years for any sort of loan, so the emergency fund continues to grow to cover any unforeseen expenses.  <response>: Is this a financial emergency? The bank is going to foreclose on you and your credit will take a hit for about 7 years. We still havent seen what the fallout from the upcoming foreclose mess it will get worse before it gets better will cause for people who want to get mortgages. You dont see a need for a loan in 3-5 years...what about what you dont see? What happens if there is a car accident and your car is totaled? A new car loan at 30? What if you get relocated again in 5 years? What are you going to do then? Definitely not buy a new house. Youll be renting for a while. How about continuing education? Thats the funny part about the future. You dont know what you will need for sure.For example, did you know you would be moving in 5 years? Did you foresee the housing market crash like it did? If you knew you were going to move in 5 years you should never have bought the house. If you knew the housing market was going to crash, you should never have bought a house. Im guessing that you didnt see these things coming. Since you didnt see this coming, why would you be so sure that the for the next 7 years you wont need a loan from a bank.Also, do you have a balance on your credit cards? I ask, because your interest rates are based on your credit score. What kind of a hit will they take. Will the banks even keep you as a credit card customer?There are a lot of things to consider here. 