Posted on: 03rd Jan, 2010 09:06 pm
I own a condo in OR in my name only which I used as my primary residence, as I lived and worked in Oregon. My husband and I own a home in California jointly which we treated for tax purposes as a second home (he is retired and has a small social security.) I made both mortgage payments as I had a large income. When I was laid off in April '09 I knew I could barely afford one mortgage payment, so we moved into the California house to try and keep it, partly because I don't want my husband's credit to be affected by this. I haven't been able to made a payment on the condo since April. I immediately listed the condo, but in 8 mos. it hasn't sold (it would have to be a short sale and I have reduced the price twice.) I have continued to make the HOA payments each month, but now I am nearly broke so I cannot continue to keep up the HOA's. The lender has not made any moves toward a foreclosure, so I am considering a DIL. I obviously don't have funds to pay a large tax obligation, either. Any helpful suggestions out there?
Hi Guest,
In case the property does not short sell, a deed in lieu is a good option. It can help you avoid a foreclosure on your credit. If there remains a deficiency from the deed in lieu, you will be responsible for it. However, you can negotiate with the lender and convince them to forgive the deficiency. If they do not forgive this amount, you can ask them to settle the debt for an amount less than the deficiency owed. If the debt is cancelled, you will be liable to pay a capital gains tax on the forgiven amount. However, there is a Mortgage Forgiveness Debt Relief Act, which may help you avoid paying taxes on this cancelled debt.
In case the property does not short sell, a deed in lieu is a good option. It can help you avoid a foreclosure on your credit. If there remains a deficiency from the deed in lieu, you will be responsible for it. However, you can negotiate with the lender and convince them to forgive the deficiency. If they do not forgive this amount, you can ask them to settle the debt for an amount less than the deficiency owed. If the debt is cancelled, you will be liable to pay a capital gains tax on the forgiven amount. However, there is a Mortgage Forgiveness Debt Relief Act, which may help you avoid paying taxes on this cancelled debt.