Written by Randy on January 26, 2012 – 8:21 pm
If you are facing the prospect of losing your home or an investment property your next decision is critical. Are you asking yourself, “Should I give my house back to the bank and let the bank foreclose, or should I negotiate a short sale?” ”What is the right decision?” ”Which affects me more?” Or perhap should I file bankruptcy now or after or at all?
The answer is very complex as there are no clear rules of engagement. What rules there are change almost daily and so does your exposure to taxes, charge off, collections, arbitration and court litigation for non-purchase money transactions tied to real estate. When looking for the answer, we must also identify from what perspective the question comes from. A short sale could result in a deficient amount in a judgment that would expose you to the practice of collections from junior lien holders. A foreclosure will prohibit a federal loan for at least 2 years, but will not result in a charge off event on the first mortgage, or expose you to the practice of collections.
A Bankruptcy will prohibit a federal loan for as long as 4 years, and will wipe out any debt that you might have been exposed to through the practice of collections prior to a foreclosure and/or short sale. You must avoid the taxable consequences involved. You cannot discharge taxes, but you can discharge the debt that will result in a 1099 taxable event.
All of the above have negative consequences to your credit. All can be recovered from.
