Federal Tax Exemption for Mortgage Debt Forgiveness Extended Through 2013

Posted on January 26, 2013 by Staff Writer

According to an azcentral.com article, recent news coverage of worries over the “fiscal cliff” have included concerns about the Mortgage Forgiveness Debt Relief Act of 2007, which was set to expire on January 7, 2013. This law originally was passed in 2007 to provide relief to homeowners experiencing financial distress in mortgage foreclosure proceedings through the end of 2009. Under the Debt Relief Act, homeowners were exempt from federal income taxes on mortgage debt forgiven by lenders through foreclosures, short sales, or mortgage loan modifications. In 2008, the Debt Relief Act was extended to provide relief to homeowners for a six year-period rather than the original two-year period.

With the last-minute passage by Congress of the American Taxpayer Relief Act of 2012, which President Obama is expected to sign this week, relief in the form of this federal tax exemption is extended through the end of 2013. Fortunately for Arizona homeowners, however, they are already protected by the state’s “non-recourse” law. In Arizona, mortgage loans generally are designated non-recourse loans, which means that homeowners cannot be sued for remaining mortgage debt that is owed after a foreclosure action. Under federal tax law, the forgiveness of non-recourse loans results in no tax liability to homeowners. Nonetheless, it is debatable whether Arizona law extends similar protections to homeowners who sell their homes in short sales, so the American Taxpayer Relief Act of 2012 will provide protection for those homeowners, at least through the end of 2013.

Mortgage foreclosures, short sales, and loan modifications are all events that may occur when a homeowner can no longer afford to pay his or her mortgage payments. Depending on the income of the homeowner, the desire of the homeowner to remain in the home, and other facts and circumstances surrounding the particular situation, bankruptcy also may be a legitimate and useful option for dealing with an impending foreclosure. Whether the goal is to simply delay or ultimately prevent the loss of one’s home to foreclosure, Chapter 13 bankruptcy proceedings may be a way to cure any past-due mortgage payments and remain in the home. Contact your Arizona and Las Vegas bankruptcy attorneys today for additional information about how a Chapter 13 bankruptcy might benefit you and your family.

I owe more than my house is worth and waiting on the bank to threaten foreclosure, what can I do?

Posted on January 17, 2013 by Staff Writer

If you are delinquent on your mortgage and still want to keep your house then bankruptcy may be able to help you. A Chapter 13 bankruptcy can allow homeowners to file bankruptcy, catch up on their missed payments and possibly even reduce the amount owed the home. In chapter 13 bankruptcies secondary mortgages can be “stripped” or removed during the bankruptcy process. Stripping mortgages can reduce the principal owed and thus reducing the monthly mortgage payments.

Additionally, as soon as a bankruptcy is filed an Automatic Stay of Protection goes into effect. This Automatic Stay of Protection prevents creditors from taking action against any of your property without first asking the court for permission. For example, a creditor cannot foreclose on a property without first “Lifting the Automatic Stay” or asking the bankruptcy court for permission. So by filing a chapter 13 bankruptcy you are able to stop the foreclosure and pay any arrearages during the bankruptcy.

If you are a home owner who does not want to keep your home then “surrendering” the property in bankruptcy may be the right option. Surrendering the property should accelerate the foreclosure. As long as a property is titled in your name then you are responsible for any HOA dues and property taxes, so if you are not living in a property surrendering it in bankruptcy may be the best option for you.

Another option is a short sale. With a short sale a homeowner obtains permission from the bank to sell the home to a third party for less than the balance owed. This is not a quick process, nor is it guaranteed but an experienced real estate agent can increase your odds. Having financial difficulties with an underwater house should not lead you to believe that foreclose is your only option. Our experienced attorneys can help explain what options may be available to you.

Short sales on the rise

Posted on January 5, 2013 by Staff Writer

According to a story in azcentral.com, sales of homes facing foreclosure are on the rise. These sales are growing fast because of lenders who are trying to avoid foreclosure on their homes after their mortgages have been left unpaid.

Foreclosure tracker RealtyTrac Inc. has said that there was a 22 percent rise in the sales of homes that are already in foreclosure compared to the previous year. The previous quarter was also slower than this one, according to the story.

Short sale is when a lender sells their home for less than they still own on their mortgage, and these sales were the majority in the sales of homes heading for a foreclosure with a 65 percent portion of the sales.

The time-consuming and expensive nature of foreclosures can mean bigger losses, so banks are becoming more tolerant of short sales as an alternative for foreclosures. Daren Blomquist from RealtyTrac said that banks are noticing that they will lose less by approving a short sale than by dealing with the long foreclosure process.

Some banks have given borrowers financial incentives to achieve a short sale, and many others are trying to speed up the process, which can easily take six months or more.

When you have legal needs related to bankruptcy or foreclosure, find a knowledgeable attorney in your are to help you. Our Phoenix, Arizona bankruptcy attorneys can help you figure what the best course of action is in your case. Contact our offices today.