Foreclosure questions

[howie]

I have two mortgages at a value of about 150,000. Home is worth about 110,000. If I foreclose without bankruptcy, what will most likely happen? I would imagine the house would go to auction and sale for much less than we owe. What happens then? Am I responsible for the difference? If not, do taxes have to be paid on any unforgiven debt? I appreciate any feedback.

[Mark80]

I'm pretty sure your right, they take it, auction it off and your responsible for the difference. I would do all that "before" filing for bankruptcy so that debt can be included!

[BassBoy]

Without using the protection of bankruptcy, Mark80 is correct, the lender will persue a deficency judgement.

With regards to the debt forgiveness, this probably isn't just handed to you. I think you would have to prove that you couldn't pay the deficency judegement (i.e., no income or not enough income). If the debt is forgiven, under the newly passed Mortgage Forgiveness Debt Relief Act of 2007, you would not have to pay taxes on said forgiven debt. Here's a link to the IRS: http://www.irs.gov/individuals/artic...179414,00.html

[howie]

Thanks very much. That is helpful!!

[paintinrosesred]

Depending.. you can do a short sale and check with your lender that they will accept the deficiency (without coming after you for the difference). I've heard in some cases you can still get a taxed on the difference because it's forgiven debt.. but you need to check with your attorney.

Also, I don't think you need to wait for the foreclosure to end before filing BK (you can do BK during the foreclosure process). Of course, I would check with your attorney.