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inhereted a house after bankruptcy was discharged

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  • inhereted a house after bankruptcy was discharged

    Our discharge was finalized in september 2009, we inherited house and about 240,000 dollars in december 2010. We also never reaffirmed our mortgage on our house. Now that it has been a year and a half can we short sale our mortgage without having to worry that they're gonna try to take the house that we inherited or come after us for the deficiency

  • #2
    You don't owe them anythimng on the mortgage that was discharged, they retain their security interest. So they can't seek a deficiency etc.

    What I would worry about is that you received this inheritance three months after discharge. I would speak to your attorney about this as there could be issues, especially if you had any idea this might be coming and failed to disclose, and I seem to remember something about changes within 6 months or a year post-discharge. Not that they go to the Trustee, just that you may have to report them.

    I don't know enough of the details to be sure, just pointing out this isn't a simple question you can rely on forum answers for.
    Chapter 7 Filed 8/11/2009, Discharged 11/23/2009

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    • #3
      Since you did not reaffirm and it was over a year after discharge for the inheritance, you should be good on all fronts. I think the time frame for the inheritance is 6 months. You are well over that time limit.

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      • #4
        It was not 3 months it was 1 year and 3 months after discharge

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        • #5
          The question is not when you received the inheritance. The question is when you became entitled to receive it. You become entitled to an inheritance the moment the Testator passes. If this person passed way within the six months after you filed the inheritance is property of the bk estate. Did this person pass on more than six months after you filed?

          Des.

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          • #6
            They passed in december 2010 so we should be safe if we do a short sale that we don't have to worry they are not gonna come after us for the deficiency right?

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            • #7
              You may have tax issues as to this if you decide to short sale your house and receive a 1099 for the deficiency. You will have to prove to the IRS you are insolvent and since you received another house and a large inheritance in 2010, that may be impossible to do. I would consult with a tax professional on your situation before you proceed with anything.
              _________________________________________
              Filed 5 Year Chapter 13: April 2002
              Early Buy-Out: April 2006
              Discharge: August 2006

              "A credit card is a snake in your pocket"

              Comment


              • #8
                Originally posted by Flamingo View Post
                You may have tax issues as to this if you decide to short sale your house and receive a 1099 for the deficiency. You will have to prove to the IRS you are insolvent and since you received another house and a large inheritance in 2010, that may be impossible to do. I would consult with a tax professional on your situation before you proceed with anything.
                Now I'm confused. The OP filed for BK in 09, and the debt was discharged. He shouldn't owe taxes on the forgiven debt...right? Are you saying a "short sale" could actually cause tax complications?

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                • #9
                  Originally posted by tacomatom View Post
                  Our discharge was finalized in september 2009, we inherited house and about 240,000 dollars in december 2010. We also never reaffirmed our mortgage on our house. Now that it has been a year and a half can we short sale our mortgage without having to worry that they're gonna try to take the house that we inherited or come after us for the deficiency
                  The debt was discharged in the BK process. The lender can't do anything about it. They are not entitled to one red cent, regardless of the inheritance that you've received.

                  They can repossess the collateral (the "old" house) and sell it. But that's something you're OK with as far as I can tell.

                  I'd just let them foreclose. The short sale doesn't benefit you in any way.

                  Good luck.
                  No person in their right mind files a Ch. 13 with lien strip pro se. I have.Therefore, please consider me insane and clinically certifiable when reading my posts, and DO NOT take them as legal advice of any kind.Thank you.

                  Comment


                  • #10
                    There are no tax issues because the debt was discharged in bankruptcy.
                    Even so there is also a Federal exemption for mortgage debt forgiveness running through 2012.
                    I agree with shark, why go through the torture of a short sale?
                    Just lock the door on your way out.
                    filed chapter 13..confirmed...converted to chapter 7...DISCHARGED!

                    Comment


                    • #11
                      Originally posted by Flamingo View Post
                      You may have tax issues as to this if you decide to short sale your house and receive a 1099 for the deficiency. You will have to prove to the IRS you are insolvent and since you received another house and a large inheritance in 2010, that may be impossible to do. I would consult with a tax professional on your situation before you proceed with anything.
                      All the original poster has to do is file a form 982 and attach a copy of the BK discharge since the debt was discharged due to insolvency. Personally, I would just let the bank foreclose and not deal with a short sale.

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                      • #12
                        Originally posted by SunshineGal View Post
                        Now I'm confused. The OP filed for BK in 09, and the debt was discharged. He shouldn't owe taxes on the forgiven debt...right? Are you saying a "short sale" could actually cause tax complications?
                        I am going by the dates of all this occurring...discharge in 9/09, inheritance in 12/10 and they are still current on their house...I would be knocking on my CPA's door before I do anything to be on the safe side. Remember, I said "may" have tax issues in my posting, did not say he will... In situations where there could be complicated financial or tax ramifications, it's always best to consult with a professional...
                        _________________________________________
                        Filed 5 Year Chapter 13: April 2002
                        Early Buy-Out: April 2006
                        Discharge: August 2006

                        "A credit card is a snake in your pocket"

                        Comment


                        • #13
                          The dates don't matter. What matters is that the debt was discharged due to insolvency. It doesn't matter that the OP is current on the mortgage, it was not reaffirmed therefore the OP is not obligated to remain current.

                          Comment


                          • #14
                            Originally posted by SunshineGal View Post
                            Now I'm confused. The OP filed for BK in 09, and the debt was discharged. He shouldn't owe taxes on the forgiven debt...right? Are you saying a "short sale" could actually cause tax complications?
                            i'm with you on the SG.....if the OP filed in 09 it's done ...there is no tax issue...and if a 1099A was issued it would have been explained on the 982........done....if the bank bills anyone for the ...also...additionally, this situation falls under the " Mortgage Forgiveness Debt Relief Act".

                            you cannot inherit or knowingly inherit until 180 after your DISCHARGE.....so i say...pack you bags and move on in!!

                            here's a bit about your state's, (Washington State's) view on the situation....

                            "Can a Judgement be Entered Against a Homeowner for the Deficiency in a Short Sale?

                            Yes, but it depends. First of all, a deficiency is the difference between what the homeowner owes the lender and what the lender is paid in a Short Sale minus expenses. For example, if the home sells for $100,000 and the note is for $125,000, and there are $5000 in closing costs and fees to sell the home, then the deficiency is $30,000 in this example.

                            In Washington State, there are two types of Foreclosure, judicial and nonjudicial. Most foreclosures however are nonjudicial. They don't go into court and have a Judge decide the case. In a Judicial Foreclosure, if the lender chooses to go that route, the homeowner (debtor), as long as they did not abandon the property for at least 6 months prior to the Foreclosure, has the right to redeem his/her interest in the property for up to one year after the judicial Foreclosure sale. RE: Chapter 6.23 RCW Redemption. When a lender Forecloses judicially, it bids the value of the property, less anticipated resale costs and holding costs. If no one outbids the lender, then the lender becomes the successful bidder at the sale, and a judgment is entered against the debtor for the deficiency, if the court confirms the sale. But now that homeowner may come back within one year and buy the home back for the amount of the original debt, legal fees, costs, and other expenses. Lenders don't usually like to do this because they may have to hold onto the property for a year before they can dispose of it.

                            A nonjudicial Foreclosure is when a home is Foreclosed on and no resolution has been reached by the auction date. The home is then put on the auction block at the King County Court House steeps, if the home is here. The lender puts a price on the home equal to the debt owed and if it doesn't sell for more than that amount then the bank actually is the successful bidder and buys the home for the amount of the debt. It's been our experience that only about 20% of the homes sell at auction. So if they don't sell at auction the lender buys them and now the lender owns the home. The lender will then usually do what they need to do to sell the home and will generally list the home with a real estate agent. When this happens it's call a nonjudicial Foreclosure and the debt to the bank by homeowner is forgiven, so a deficiency judgment can not be entered against the debtor here in Washington.

                            In real life it's rare for the lender to Foreclose judicially because Washington is a redemption state. Also, if the homeowner doesn't have equity in the property, and they do not have other assets the lender can go after, they usually don't attempt to obtain a deficiency judgment. It's not to say they won't try, but it is usually to their advantage to just get the house sold with a Short Sale and write the loss off and move on.

                            When the lender writes the loss off they will then issue a 1099 to the homeowner for the amount of the deficiency, $30,000 in our above example. That $30,000 will then be treated as income by the IRS. The Mortgage Forgivness Debt Relief Act of 2007 was sign into law in 2007 and it was intended to "forgive" that debt amount from the Short Sale for up to 2 million dollars.Mortgage Forgiveness Debt Relief Act"
                            Last edited by tobee43; 03-07-2011, 07:33 AM.
                            8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

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                            • #15
                              I can see Flamingo's point. It seems like trying to do the "right thing" always comes back to bite us, lol.

                              Comment

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