Sarasota, FL - Facing Foreclosure? Before you file Bankruptcy ... read this

Real Estate Agent with Allison James Estates & Homes, Sarasota 941-957-3737

Usually when someone talks to a bankruptcy attorney, they will be advised to file bankruptcy; however this might not be the best option when other alternatives are available.  Many homeowners facing foreclosure are under so much stress, they are usually looking for a quick way out; however Bankruptcy may not be their best option.   Why?  Because bankruptcy is not just a legal matter, it is a financial matter that should also be discussed with a qualified CPA.   Many times homeowners file bankruptcy without exploring all the other possible options to bankruptcy that could have a better outcome to their overall financial recovery.

What are some of the reasons people file bankruptcy when facing foreclosure, and what are some possible solutions?

A  Pending Deficiency Judgment - In facing a pending foreclosure, many homeowners are concerned about a deficiency judgment.   However, a pending deficiency judgment could be eliminated as a condition for completing a Short Sale.  If a deficiency Judgment cannot be eliminated in Short Sale negotiations, then a homeowner knows at that point what options are available to them by their lender.  

Tax Concerns of a pending foreclosure - In a foreclosure or Short Sale, a homeowner may have to pay income tax on their lenders reported loss on the property (on IRS tax Form 1099-C Cancellation of Debt), otherwise known as "Phantom Income".  However there are possible solutions to "Phantom Income" that should be discussed with a qualified CPA.  These possible solutions are as follows:

•·         Mortgage Forgiveness Debt Relief Act of 2007

•·         Insolvency - IRS Tax Form 982 (Publication 4681)

•·         Tax Write offs from the sale of a property

The homeowner no longer wants to own the property facing foreclosure -  One of the biggest misconceptions that homeowners have about bankruptcy is that filing bankruptcy will relieve them of all the expenses and liability of a property they include in a bankruptcy. 

Often because the debt on the homeowner's property is higher than what the property is worth, the trustee in a bankruptcy will abandon the property.  Once the trustee abandons the asset, ownership and control of the real estate defaults back to the original title holder (subject to the property going into foreclosure).  This means the homeowner is still legally liable for certain expenses associated with the property, even though they included the property in their bankruptcy. 

Any debts that the debtor incurs after the bankruptcy petition filing date are considered post-petition debts that are not dischargeable in the previously filed bankruptcy.   In this case, a Short Sale is still an option to transfer ownership to a new buyer and limit a homeowner's potential expenses and liability.

In closing, everyone's situation is different and it is important to seek qualified advice from a CPA in addition to talking to a bankruptcy attorney before a homeowner files for bankruptcy.   In addition, Short Sale Brokers can also provide valuable information (free of charge) in discussing the benefits of a Short Sale.  For more information on Short Sales, visit:


Posted by

For more information on Short Sales in Sarasota and Foreclosures in Sarasota, please CONTACT US. We have over 25 years experience in real estate, and have been highly successful in negotiating short sales in Sarasota County & Manatee County, Florida.

Troy Funk, CDPE, SFR
Sarasota Certified Distressed Property Expert
Sarasota Short Sales & Foreclosures Resource
Florida Licensed Real Estate Agent

Allison James Estates & Homes
665 S. Orange Ave. #2
Sarasota, FL 34236
(941) 365-8769

WATCH this Sarasota Short Sale Testimonial Video


Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Albert Almeida 01/12/2011 03:49 AM
ActiveRain Community
Florida Sarasota County Sarasota
sarasota foreclosure
sarasota short sale
sarasota short sale realtor
sarasota bankruptcy
sarasota bankruptcy attorney

Spam prevention
Show All Comments
Albert Almeida
Exit Elite Realty Group - Newark, NJ
Realtor 203K Specialist

This is a good read.

Jan 12, 2011 03:43 AM #1
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?


Troy Funk

Broker / Associate
Ask me a question

Additional Information