Some advice for girlfriend

[RK05]

I need some advice for my girlfriend. Last year (July) she ended a bad relationship with a former liven boyfriend. Her and her son left her house because she did not feel safe there and she couldn't afford it by herself. At the same time she turned in her lease car (because her lease was up) but she missed the last two payments. She owes more on the house than what it is worth.

We have since been trying to sell it as a "short sale" and have an offer put in. The bank has had the offer for a month now and when we call they act like they don't know what's going on. We have talked to many people there. We are afraid that the buyer might not wait much longer. At the same time a company called Genworth is the insurance company for Freddie Mac and they said the house qualifies for a "Deed in lie" but need both the bank and Freddie Mac to agree.

Her credit is already ruined with a score of 400. She owes money for the house, her leased car an overdraft account she had tied to her house payments and some medical bills.

Should she just file for bankruptcy and get it over with?

If you need more info just ask.

Thanks!

[JRScott]

Well really sounds like it is a rough situation.

It sounds like she could be a candidate for bankruptcy. She should schedule 3-4 consultations with local bk lawyers. Most give a free initial consult.

She'll need how much she's made the last 6 months
The last 3 years of tax returns
Copies of the mortgages, lease etc
Copies of all bills

Then a lawyer should be able to tell what is best for her.

[RK05]

She has already spoken to one late last year. They said she would be able to file chapter 7. We were just waiting to see if we could get rid of the house first but that seems to be taking a long time. If she were to either do a "deed inlue" or "short sale" is she responsible for the difference in $$ to the bank. Also, would she owe taxes on any money that is foregiven?

We are in Ohio if that matters.

[BassBoy]

Check out the link about debt forgiveness.....

http://www.irs.gov/irs/article/0,,id=179073,00.html

[JRScott]

I'm glad BassBoy found this sorry I missed your reply

In the case of a Deed in Lieu or a Short Sale no you are not responsible to pay the remainder however it is considered forgiven debt that counts as income at the end of the year. They'll send you a 1099 for that and you'll have to pay taxes on it.

[RK05]

She falls under the guide lines from the link BassBoy had in his reply. Once she would get a form 1099-c she would have to fill out a form 982 to clear it from her taxes.