Mortgage Foreclosure Deficiency

[aaj67]

If I have to file BK chapter 7 BEFORE the house is sold due to foreclosure. In other words, before the exact amount of the deficiency is determined. How can I list the deficiency? I mean is it possible to list an estimated deficiency in the BK? Or do I list the entire balance I owe on the house? How does that work?

[bcohen]

You just put the mortgage lender, list the debt as "secured", and the mortgage will be discharged as to you personally. (Of course, the lender will still have a lien on the property, and they can foreclose on this lien, but any deficiency balance will have been discharged, and they can't go after you for it.)

[aaj67]

You just put the mortgage lender, list the debt as "secured", and the mortgage will be discharged as to you personally. (Of course, the lender will still have a lien on the property, and they can foreclose on this lien, but any deficiency balance will have been discharged, and they can't go after you for it.)

I was wondering if I file AFTER they foreclosed on the house but BEFORE it is actually sold. In other words, the mortgage would be an unsecured debt at that point..right? So I should include the mortgage Co. and the entire balance I owe...

[tobee43]

I was wondering if I file AFTER they foreclosed on the house but BEFORE it is actually sold. In other words, the mortgage would be an unsecured debt at that point..right? So I should include the mortgage Co. and the entire balance I owe...

yes, as long as you filed and included the mortgage in your bk and it was discharged you are not responsible for any deficiency. many people file after the foreclosure do to the deficiency. however, remember mortgage debt relief act of 2007 expires in 2013 to spare you from any tax liability as well. of course, there is talk they will extend it was again, but congress will have to be fairly quick. it's just good to get in before it comes into question.

[aaj67]

yes, as long as you filed and included the mortgage in your bk and it was discharged you are not responsible for any deficiency. many people file after the foreclosure do to the deficiency. however, remember mortgage debt relief act of 2007 expires in 2013 to spare you from any tax liability as well. of course, there is talk they will extend it was again, but congress will have to be fairly quick. it's just good to get in before it comes into question.

Oh! I didn't know that..when it will expire in 2013?

[keepmine]

There is no tax liability for debts discharged in bk.

[aaj67]

There is no tax liability for debts discharged in bk.

Thanks..that's what I thought..

[justbroke]

I was wondering if I file AFTER they foreclosed on the house but BEFORE it is actually sold. In other words, the mortgage would be an unsecured debt at that point..right? So I should include the mortgage Co. and the entire balance I owe...

If it actually goes through foreclosure sale AND the deed has changed hands, then you list it on Schedule F -- Unsecured Creditors -- and put the amount as $1.00 and mark it as "un-liquidated", "contingent" and/or "disputed" to indicate that the actual amount is not known. (If you have not been foreclosed, then it just gets listed on Schedule A -- Secured Debt -- with the current mortgage balance.) As already stated, the debt would be discharged and you would have no discharge for any deficiency created upon foreclosure/sale.

As for taxes, if the lender decided to send you an IRS Form 1099-C (Forgiveness of Debt) then you would complete IRS Form 982 and mark the debt as discharged. As keepmine wrote, there is no tax on discharged debt.

[aaj67]

If it actually goes through foreclosure sale AND the deed has changed hands, then you list it on Schedule F -- Unsecured Creditors -- and put the amount as $1.00 and mark it as "un-liquidated", "contingent" and/or "disputed" to indicate that the actual amount is not known. (If you have not been foreclosed, then it just gets listed on Schedule A -- Secured Debt -- with the current mortgage balance.) As already stated, the debt would be discharged and you would have no discharge for any deficiency created upon foreclosure/sale.

As for taxes, if the lender decided to send you an IRS Form 1099-C (Forgiveness of Debt) then you would complete IRS Form 982 and mark the debt as discharged. As keepmine wrote, there is no tax on discharged debt.

Thanks for your response. Isn't possible for the bank to foreclose on my house without selling it to a third party. In other words, it will be bank owned. In this case, I would list it as unsecured debt...right? Then I will list the total balance owed?

[justbroke]

If it becomes bank owned (a/k/a REO) prior to filing, then you wouldn't put the balance. You would put and unsecured amount of $1 and mark it as "contingent"... since you don't know what you owe until they actually sell it.

[aaj67]

If it becomes bank owned (a/k/a REO) prior to filing, then you wouldn't put the balance. You would put and unsecured amount of $1 and mark it as "contingent"... since you don't know what you owe until they actually sell it.

Oh! I see..thanks! That's exactly what I was looking for..

[tobee43]

There is no tax liability for debts discharged in bk.

the issues with the 1099a and c...one for mortgage and one for credit card companies can be issues and just attach the from 982 as jb points out. i'm just reminding everyone that the act ends in 2013.