Archive for the 'Foreclosure' Category

04
Mar
13

Intro to Bankruptcy

Download our Intro to Bankruptcy Powerpoint presentation – click on the link below.

 

Intro to BK Video Zarcone Law Firm

 

03
Dec
12

Short Sales and Tax Relief

If your lender agrees to a short sale or to accept a deed in lieu, you may potentially incur income tax on any resulting deficiency. In the case of a short sale, the deficiency would be in cash and in the case of a deed in lieu, in equity.

The IRS’s position is as follows: When you first got the loan, you didn’t owe taxes on it because you were obligated to pay the loan back. However, when you didn’t pay the loan back and the debt was forgiven, the amount that was forgiven became “income” on which you owe tax.

The lender sends a 1099 to the IRS with the amount of the deficiency.

No tax liability for some loans secured by your primary home. In the past, homeowners using short sales or deeds in lieu were obligated to pay tax on the amount of the forgiven debt. However, the new Mortgage Forgiveness Debt Relief Act of 2007 changes this for certain loans during the 2007 through 2012 tax years only.

The new law provides tax relief if your deficiency arises from the sale of your primary residence. Here are the rules:

  • Loans for your primary residence. If the loan was secured by your primary residence and was used to buy or improve that house, you may generally exclude up to $2 million in forgiven debt. This means you don’t have to pay tax on the deficiency.
  • Loans on other real estate. If you default on a mortgage that’s secured by property that isn’t your primary residence (for example, a loan on your vacation home), you’ll owe tax on any deficiency.
  • Loans secured by but not used to improve primary residence. If you take out a loan, secured by your primary residence, but use it to take a vacation or send your child to college, you will owe tax on any deficiency.

The insolvency exception to tax liability. If you don’t qualify for an exception under the Mortgage Forgiveness Debt Relief Act, you might still obtain tax relief. If you can establish you were legally insolvent at the time of the short sale, you won’t be liable for paying tax on the deficiency.

Legal insolvency occurs when your total debts are greater than the value of your total assets (your assets are the equity in your real estate and personal property). To use the insolvency exclusion, you’ll have to prove to the satisfaction of the IRS that your debts exceeded the value of your assets.

Bankruptcy to avoid tax liability. You can also get rid of this kind of tax liability by filing for Chapter 7 or Chapter 13 bankruptcy, if you file before escrow closes. Of course, if you are going to file for bankruptcy anyway, there isn’t much point in doing the short sale or deed in lieu of, because any benefit to your credit rating created by the short sale will be wiped out by the bankruptcy.

Contact the Zarcone Law Firm today for a free, no obligation consultation – 619-800-3082 or by email.  Mention this blog post and save $50.00 off any bankruptcy filing.

25
Apr
11

FAQ regarding deed in lieu of foreclsoure

Q. What is the definition of a deed in lieu of foreclosure?

A. The homeowner exchanges his or her ownership interest in the house, represented by a deed, back to the mortgage holder in order to avoid mortgage foreclosure and in some cases forgiveness of a mortgage deficiency.

In basic terms, you give the keys to your home back to the bank and you walk away;  the bank agrees not to foreclose or ever ask you for any more money.

Q. Under what circumstances would a homeowner do a deed in lieu of foreclosure?

In general, two sets of homeowners pursue a deed in lieu of foreclosure as a way out for mortgage trouble.

  • Homeowners who do not want to keep their home under any circumstances
  • Homeowners who, despite a wish to keep their home, reached the assumption that no foreclosure prevention alternatives will allow them to keep their house.

Q. Why would someone want to forfeit their home as a first choice?

  •       Homeowner does not like the house itself.
  •       The location is no longer right.
  •       The house is no longer the right size or right type.
  •       Neighborhood or zoning degradation.
  •       Repair, renovation or structural issues.
  •       Homeowner no longer needs a house at all anymore.

Q. How does a homeowner end up at the conclusion that they must give up the house?

  • Mathematically beyond hope
  • No applicable methods to stop foreclosure
  • Exhausted all options

If you are facing foreclosure, contact us for a FREE initial consultation:

619-800-3082

info@financialfreshstart.org

31
Mar
11

Mortgage Help Is Declining Fast

Last summer, officials revealed  a $1 billion program to provide loans to aid the unemployed pay their mortgages until they could obtain employment. It was scheduled to go into effect before the end of the year but the program has yet to accept any applications.

Now the existence of the main program, the Home Assistance Modification Program, is in doubt.

The House, controlled by the Republicans, voted this week to terminate the foreclosure relief program. The Democrat-controlled  Senate will seek a rescue.

The housing assistance effort has failed to end a tsunami of foreclosures and a decline in home values.  There were 225,000 foreclosure filings in February nationwide.

If you have questions about a foreclosure contact us at

619-800-3082

info@financialfreshstart.org

 

 

10
Jan
11

show me the assignment! Mass Supreme Court stops foreclosures.

The Massachusetts Supreme Court recently ruled against Wells Fargo and U.S. Barncorp in two foreclosure cases in which the loans were packaged into securities.  The Supreme Court upheld a decision to void two foreclosure sales because the owners of the loans could not establish that the loans had been assigned to them.  Both of the loans had been assembled into mortgage-backed securities sold to investors.

This is an example of “show me the paper” defense. Cases in California where homeowners have attempted to establish a defense that the party foreclosing on their home could not produce the original note have not been successful.

Individual loans often are sold to an investor, with the new owner’s name left blank in loan documents to limit paperwork hassles as the loan subsequently changes hands before being combined with other loans into mortgage-backed securities.

Justice Robert J. Cordy concluded in a concurring opinion that the two banks showed “utter carelessness” when they “documented the titles to their assets.”

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