Should I File Bankruptcy After Foreclosure?
Posted on July 16, 2009 at 2:43 am
Should I file bankruptcy after foreclosure or not? How does this impact my credit?
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Rep Points:
Posted on July 16, 2009 at 2:49 am
Wait, has it happened yet? The foreclosure? And I wonder if you already have considered the alternatives to bankruptcy..
Anyway, a foreclosure stays in your credit for 7 years and a bankruptcy can be up to 10 years. Chapter 7 (10 years) and Chapter 13 (7 years).
Posted on July 16, 2009 at 3:01 am
No not yet but it looks like the amount of debt would exceed the sale value of the house..
Posted on July 16, 2009 at 3:14 am
Both bankruptcy and foreclosure can ruin your debt, and I think that in your case, it's best to file bankruptcy to avoid what they call "deficiency judgment." You don't want your lender going after a judgment against you to get a right to garnish your income.
A bankruptcy can discharge your remaining debts because I think after foreclosure, the secured debt becomes unsecured. Can somebody verify that?
Posted on July 16, 2009 at 3:25 am
I agree with gave up on the riddle, a bankruptcy would discharge the remaining debt, but with regards to deficiency judgment, if your deficiencies stem from the first mortgages and if you live in a state that prohibits suing for deficiencies, maybe you don't have to worry about it. If you live in a nonjudicial foreclosure state, a lender can't go after the deficiency without first filing a lawsuit. But in some states a lender is allowed to file a deficiency judgment as part of the underlying foreclosure lawsuit, some are asked to file a separate lawsuit.
So should you file bankruptcy after foreclosure? It depends on where you live (state) and if you can actually afford a bankruptcy petition.
Posted on July 16, 2009 at 3:27 am
How about the taxes? Does foreclosure have tax consequences?
Posted on July 16, 2009 at 3:29 am
That would be a yes. The deficiency amount, if there is any, just like in this case, is the taxable income.
Posted on July 16, 2009 at 3:37 am
I agree..unless the deficiency amount came from the acquisition or improvement of the principal home.
The IRS learns of cases like this when it receives the IRS Form 1099C from the lender. It's like a report of income from a loan that can no longer be repaid (ex. in a short sale or foreclosure).
Posted on July 16, 2009 at 3:56 am
Okay whether you'd owe tax depends on what light up light up has said, if your default was on a mortgage or a debt secured by your home-and you used your loan to improve the house: you won't owe tax.
You'll owe tax if you default on a mortgage secured by a property that is NOT your primary residence or if you used the money you borrowed on anything other than home improvement (trips, shopping, etc.)
Posted on July 16, 2009 at 4:27 am
is there a way to get out of it?
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