I have a friend that cannot make his monthly payment and cannot sell his home for what is owed. The bank is offering to do a short sale in which the buyer will pay less than what is owed and he would have to agree to pay 5K over 5 years at zero interest and will be 1099ed 35K to claim as income on his tax return. The other option is to say no and let it get foreclosed. Which is the better option?
If he lets it go to foreclosure would he owe anything? Should he consider filling bankruptcy and what are the consequences?
Thank you in advance.
2007-08-02 00:57:42 · 4 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
He is best to take the short sale offered by the lender. While this may cause some harm to his credit file, it will be nothing as drastic as will a foreclosure/bankruptcy. Of course, it is going to cost him financially, to the tune of $5,000, plus whatever increased income tax he will incur from having to report an additional $35K on his income. I'd venture that the 1099 will cost him anywhere from $7,000-$10,000 in additional income tax next year.
Your friend owes the money. He is best to accept whatever reasonable solution the lender offers. This lender is being quite cooperative.
2007-08-02 01:06:53 · answer #1 · answered by acermill 7 · 0⤊ 0⤋
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RE Which is best the short sell or foreclsure/bankruptcy?
I have a friend that cannot make his monthly payment and cannot sell his home for what is owed. The bank is offering to do a short sale in which the buyer will pay less than what is owed and he would have to agree to pay 5K over 5 years at zero interest and will be 1099ed 35K to claim as income on his tax return. The other option is to say no and let it get foreclosed. Which is the better option?
If he lets it go to foreclosure would he owe anything? Should he consider filling bankruptcy and what are the consequences?
Thank you in advance.
2014-10-02 22:39:05 · answer #2 · answered by ? 1 · 0⤊ 0⤋
Hi,
He doesn't have to go for bankruptcy if the bank is willing for a foreclosure. It seems foreclosure is the best option for him as he will have a chance to rebuild his credit standing in future. Checkout http://www.monetaryguru.com for some useful info and tips on foreclosure. Good luck!
2007-08-02 10:39:48 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Short sell.
Your friend will owe a lot more if they allow foreclosure.
2007-08-02 08:02:06 · answer #4 · answered by mister_galager 5 · 0⤊ 0⤋