My house has began the foreclosure process and will be final in aug. I can not afford to keep it. im not worried about my credit, but i am worried that the bank will try to recover the approx. 80k that will remain after it is sold at auction. I owe 260k and the same house down the street sold for 180k the foreclosure has been given to a local atty to act as trustee. I have only one loan on the house. please advise!!
2007-06-18 05:10:57 · 4 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
Most likely the bank will not try garnishing your wages, although they can sue you for the difference and attempt to collect on their debt if they so choose. More likely though you will receive a 1099c for the amount of the difference and you will have to claim this difference as "normal" income and you will have to pay taxes on this amount though. The 1099c is due to a cancellation of debt. Your other option is to file bankruptcy which will protect you from the lender coming back after you for this difference. Best of luck and read below for more information on foreclosures.
2007-06-18 05:23:05 · answer #1 · answered by dzwreck 4 · 0⤊ 0⤋
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2016-10-09 11:13:46 · answer #2 · answered by Anonymous · 0⤊ 0⤋
You'll have to check your contract. If it is written "without recourse" then the bank will have to accept whatever they receive at auction as payment of the obligation in full. They will not be able to pursue you for any balance. If the contract is written "with recourse" then they can go after you for the shortfall.
Comb through the loan agreement carefully. It will state if it is "with recourse" or "without recourse" somewhere, possibly buried in the fine print.
Keep in mind that there's a chance that you may have a taxable gain on the cancelled debt. The bank will send you a Form 1099C at the end of the year listing what they figure as the taxable portion of the forgiven debt. If you are insolvent at the time of the cancellation (that is, if your liabilities exceed the FMV of your assets) then there is no tax on the forgiven debt. Consult with a local tax pro on that issue and for advice on proving your insolvency status to the IRS at the time of the COD.
2007-06-18 05:19:03 · answer #3 · answered by Bostonian In MO 7 · 2⤊ 0⤋
That's why they have PMI on the mortgage. They should charge their loss against it.
2007-06-18 05:17:38 · answer #4 · answered by Anonymous · 0⤊ 0⤋