Cancellation of Debt after Foreclosure
If you are submerged under debt and are dreading the loss of your property followed by a foreclosure, it is the right time to get for yourself a debt relief program. Foreclosure is a legal procedure by which the owner losses his right to property due to faulty payments or debt. Generally, it follows a public auction of the property and the liquidated money is used for the repayment of the mortgage debt. A debt relief program will help you get rid of your mortgage debts and at the same time will also save you from foreclosure. However, sometimes it is not possible to save the property and it is a wise decision to opt for foreclosure. It might come as a boon in a situation of crisis and free you from all the debts.
Getting rid of all the financial debt is not all that easy. As per a San Jose Real Estate agent, “The cancellation of debt results in tax payments and one has to be ready to deal with the consequences”. Nevertheless, it is impossible to free oneself from the grips of tax that is associated with foreclosure and live a life that is free of debt.
One way to get rid of the tax is by filing the Mortgage Forgiveness Debt Relief Act (MFDRA). To gain protection under MFDRA, it is necessary to owe a foreclosure debt of at least one million dollars. The act can be put into practice only for the qualified gratitude on a taxpayer’s primary residence. There are some other ways as well through which, the payment of tax can be avoided. Some of them are discussed below.
• The debt can be canceled if bankruptcy is filled under Chapter 11.
• If the debtor is bankrupt during the debt cancellation process.
• If the family or relatives are involved in the foreclosure, the tax can be written-off as a gift.
There are a few more ways to avoid the repayment of tax after foreclosure. However, it is best to seek professional help in such crises. As a taxpayer, it is necessary for you to know the aforementioned points so that you can deal with the situations in a better way.
The above article is written by the writers of WizKraft Media and Marketing!!!
- TurboTax – Tax Relief for Cancelled Mortgage Debt (turbotax.intuit.com)
- Do you pay taxes on debt discharged in bankruptcy (wiki.answers.com)
- Foreclosed? The tax man may want his cut (reowablog.wordpress.com)
Like this post? Subscribe to my RSS feed and get loads more!