What is a Foreclosure?
When you purchase your home and sign that contractual agreement to pay your mortgage, your lender is granted a secured interest in your property. Usually initiated by default in payments, a foreclosure is the process by which the lender repossesses the property to satisfy the debt.
Foreclosure Tax Laws
There is a common misconception that homeowners are relieved of any further consequences should they walk away and do nothing and allow the bank to foreclose on their home. Contrary to popular belief, depending on certain circumstances, there can be tax implications in some situations. In the event of a foreclosure, loan modification, short sale, and/or deed-in-lieu of foreclosure where the lender is cancelling or forgiving a portion of the debt owed, the amount forgiven could be considered taxable income.
There are however exceptions to every situation. To find out more please visit the IRS Special Web Section Unveiled for homeowners who lose homes; Foreclosure Tax Relief Available. We also recommend reviewing the Mortgage Forgiveness Debt Relief Act of 2007 to see if you qualify for debt cancellation.
Non Profit Foreclosure Prevention Help
We are HUD approved housing counselors with years of industry experience available to provide you with sound unbiased advise on all options available to help you avoid foreclosure. We do not claim to be licensed attorneys or CPAs and are NOT qualified to provide legal and/or tax advice. We do not recommend that you pay an attorney to modify your loan, but certain situations may require special legal advice. Be aware the IRS could consider debt forgiveness as income, and there is no guarantee that a lender who accepts a short sale will not legally pursue you for the difference between the amount owed and the amount paid. Our counselors are here to understand your situation, and at your direction, can work with your loss mitigation department to determine the best available plan for you. Contact us so we can help you evaluate your situation today!
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