“My Ex-wife decided to Short Sell our former house. Unfortunately we both signed the mortgage when we bought the house together. I think that means I am still liable for the debt.
She got the home after the divorce. The court gave her the home in the divorce. The market has declined and the house is worth about 120k less than the mortgage amount.
I have a good job and some assets. Will I have to pay back the bank ofr the money they lose. (My ex is selling because of financial problems.)
Also, someone said I might have to pay income taxes on the written off debt. Is that true? Please help me out here. Sincerely, Tom.”
Here was our answer. Tom, you probably should talk to a good lawyer. This is not the standard short sale. There might be tax laws that will allow you to not be liable for the tax liability on the written off debt.
In my opinion, the Tax Law allows you to write off most of the forgiven debt on a short sale. You have to short sell the house before the end of 2012 and have lived there for 2 of the last 5 years.
Your ex probably meets that criterion. I would think that since she lives in the house, then you wouldn’t be liable for the taxes. But, then again, I am not an accountant and don’t know how the law would affect such a unique situation.
Will you have a deficiency judgment? We can’t know for sure because there are so many variables involved. However, in about 80% to 90% of the time, you won’t have a deficiency.
That is because most lenders just forgive the debt. They have found it tough to collect the upside down debt. Most people are short selling because of financial problems.
They are struggling to avoid bankruptcy without a large deficiency judgment. When they see a $100,000 deficiency, then they will probably just declare bankruptcy. Then the lenders gets nothing anyways.
Check with a competent short sale realtor in your area. They will be able to give you a good idea of whether or not you will have to pay the deficiency.
Thinking about a loan modification?Our Layton loan modification kit will show you how to reduce your mortgage payment, keep your home, and get back on your feet. Send me an e-mail at FORSIECITY@gmail.com to request a Free Copy.
Thinking about a short sale? I can help you short sale your property so you can move on with your life. Send me an e-mail at forsiecity@gmail.com. I will contact you for a free consultation.
When we talk, I will explain how the process works in detail and answer any questions you may have. Or, if you prefer, you can call me at (801) 651-0707
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Thanks for reading this, Dave Forsberg.
Dave is a Real Estate Agent at Presidio Real Estate Utah Short Sales Realtor:
Phone: (801) 651-0707. Forsiecity@gmail.com.
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