In our intitial meeting with clients, we are always quick to point out the possiblity of having to pay the IRS for "Phantom Income" (i.e. in some cases the IRS considers the loss that the lender takes to be income, and can thereby force you to pay income tax on that loss). This not always the case. The Mortgage Forgiveness Debt Relief Act of 2007 was encacted on December 20, 2007. Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence. Please consult with an attorney or CPA to verify that you qualify for this relief. Please click on the web address above for more details.
The other topic we go over in our initial meeting is that of Deficiency Judgements. In rare cases, lenders also pursue a Deficiency Judgement against borrowers and attempt to collect the amount that was short. This does require a separate action to be filed in court, causing the mortgage company to incur further expense. The mortgage company is also acutely aware (after seeing our extensive short sale package) of the borrower's inability to pay, so it is our belief that they see further collection action as fruitless. As always, consult with a qualified attorney if you have any concerns/questions about your particular situation.
I hope this little "blurb" has been helpful. Please visit foreclosureuturn.com to learn more about what we can do to help you. You can also SUBSCRIBE TO OUR BLOG. That way, you'll get an email everytime we post a new report!
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