Did You Know Foreclosure Can Affect Taxes?
Did you know that foreclosure can affect your tax filing?
When you are in the middle of fighting against a mortgage company foreclosing on your home, the last thing you might think about is how it could affect your taxes. A home mortgage is still a debt, and if you have not filed for bankruptcy protection, you could still be on the hook for the balance of the debt even after the foreclosure process and sale of the property is complete. In fact, there are tax liabilities you may have incurred, as well. It is a good idea to seek professional advice on both legal and tax options. If your property is in New York, visit foreclosurefights.com and fill in the form to receive more information on how Attorney Michael K. Karlson can help you insulate yourself from foreclosure fallout.
One of the alternatives to foreclosure is to offer the lender a deed in lieu. This means you will sign the deed to your home over to the lender, granting the lender ownership, in exchange for the lender forgiving the debt and skipping the foreclosure process. The lender may be willing to accept this action to avoid the cost of foreclosing on the home, however, when the other tax documents come in, you will likely receive a 1099 for the amount of the loan that was forgiven after the property was liquidated.
Additionally, even after the paperwork is completed on your end, the lender does not always transfer the property immediately, leaving you liable for any injury that might occur to someone hurt while on the property before ownership is transferred. An attorney understands these and other legal pitfalls and can help protect you from harm.
Thinking of selling the property to avoid foreclosure? If you sell the property for less than you owe on it, known as a “Short sale” and cannot make up the difference to the lender, you must get the lender’s permission to sell it. Even with that permission, any shortage will count as 1099 income to you. There are exceptions to how much counts toward that 1099, and an attorney may be able to negotiate more favorable terms. Talk to your attorney today and find out what you could be facing, and how to reduce the damage.
Full foreclosure process may still leave a balance due. Sometimes there is a second and even third lien or mortgage on the property that prevents a lender from accepting a deed in lieu of foreclosure or a short sale. To clear the title, the lender may need to complete the foreclosure. Once the property is liquidated and the proceeds of the sale are applied to your mortgage loan, in most states, you can still be liable for the balance of the money owed to the lender. How a lender proceeds can be negotiated by you or by an experienced attorney, who knows what to look for in the original loan agreement. Do you have representation by someone experienced in mortgage and foreclosure law? Visit foreclosurefights.com and get the protection and relief you deserve.