Besides losing your home, foreclosure can bring about other consequences. If the sale price your lender gets for your home, say $100,000, is less than what you owe, say $150,000, your lender could sue you for the deficiency amount of $50,000.00.
If your lender decides not to sue you for that deficiency balance, you may not be out of the woods just yet. If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable.
However, the Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence and applies to debt used to buy, build or substantially improve the taxpayer’s principal residence, or to refinance debt incurred for those purposes. The Act sunsets in 2012, meaning that unless Congress extends it beyond that time, debt relief will only be available through 2012.
You can read more, here, at the Internal Revenue Service’s website.
Peter Mullison is a bankruptcy attorney at Colorado Bankruptcy Law Group, LLC. If you are considering Chapter 7 or Chapter 13 personal bankruptcy, schedule your free, confidential bankruptcy consultation with a Colorado bankruptcy attorney today. Our online scheduling system allows you to schedule bankruptcy consultation at a time that is convenient for you.
Colorado Bankruptcy Law Group, LLC is a personal bankruptcy firm serving clients in the greater Denver area.
photo: http://www.flickr.com/photos/bitzcelt/ / CC BY-NC-ND 2.0
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Mon, Feb 1, 2010
Consumer Law, Consumer Protection