The Mortgage Forgiveness Debt Relief Act of 2007 is set to expire December 31, 2012.  As a result, people who lose their homes to foreclosure will be required to pay taxes on any debt that the bank or mortgage company does not recover after the sale of their foreclosed home.  The same applies to homeowners whose loan principle was reduced by a mortgage modification.  The Internal Revenue Service considers forgiven debt to be taxable income.

The 2007 Mortgage Forgiveness Act was a safe harbor that excepted forgiven debt on a principle residence from being considered taxable income, but that law expires December 31, 2012.   There are other exceptions to the rule that forgiven debt is taxable income.  Please see my article,  Tax Implications of Forgiven Debt and How Bankruptcy Can Help.

It seems ridiculous to penalize a homeowner who could not make her mortgage payments with a substantial tax debt.  Where a homeowner has made every mortgage payment owed, but the housing market reduced the value of the home and put the homeowner “under water,” the homeowner forced to sell “short” would effectively be taxed on money already lost!

Others see the exception offered by the Act as a reward for bad behavior, allowing homeowners off easy when they bit off more than they could chew.

A bill to extend the Act is in Senate but as of now has not been passed.  There is wide ranging opinions on if and when an extension may occur.

 

Interested in more information on how a bankruptcy can help with your foreclosure problem?  Give us a call at 732-302-9600 or fill out our online consultation form and we will call you.

A lot of folks out there have a lot of preconceived notions about how to fix their credit when they walk through our doors.

A friend of a friend has already told them how to do it, what to do, and what not to do.

Your friends mean well but don’t you want to talk to an expert about that?

Fixing your credit is going to take time, patience and good information.

 

Want to talk to one of our experts about your credit?  Give us a call at 732-302-9600 or fill out our free online consultation form and we will call you.

I get the same question from all my new clients.  Every single time.

“How do I rebuild my credit if I file bankruptcy?”

I love this question because I get to give them both good news and a yet more compelling reason to file personal bankruptcy.

1.  Your credit can be rebuilt.

2.  Your credit will be rebuilt fast by filing personal bankruptcy than it will be if you spend the next seven years trying to get out of debt by doing payment plans with your creditors that will be very expensive.

Personal bankruptcy is a financial tool that allows the debt you are drowning in to be wiped out and give you a fresh start.  This means that instead of treading water in a payment plan the debt is gone and instead you can focus on moving forward.

But how do you move forward?  MSN money recently posted some excellent tips on rebuilding you credit after a bankruptcy and we have re-posted them for you.

Have more questions about how our bankruptcy lawyers can help you get a fresh start.  Give us a call at 732-302-9600 or fill out our online consultation form and we will call you.