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Reinstatement Mortgage Debt Relief

Submitted by on Tuesday, 10 November 2009View Comments
Reinstatement Mortgage Debt Relief

You take heard that if you agree to a short sale you will have a big tax tabulation from the IRS, and you don’t have the money to pay for that.

Relax. You will not own income tax on the amount of the owing that is forgiven, as long as the short sale occurs before 2012. At, the Mortgage Debt Relief Act of 2007 waived the income-tax rule on forgiven encumbered through 2009, but it was extended to 2012 in the big $700 billion bailout pecker of 2008. Up to $2 million in forgiven debt is shielded from receipts tax for married couples filing a joint tax return ($1 million for individuals).

You were turned down for a tiny sale. Is foreclosure your only option?

Probably. Your sole other option is a "deed in lieu of foreclosure," where you agency over the deed to your home to the lender, who then takes the assembly without going through the formal foreclosure process. While this is an alternative, it is not widely offered by lenders. Short sale or foreclosure is a more seemly alternative if you cannot agree to a loan modification and need to let go of the house.

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