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Guest

own two properties in california. my second property i purchased december 2005 and i owe 580k, 1st of 400k and 2nd 180k. two part question: first, i can no longer afford it and am behind 5 months on the first and same on the second. if i walk away from it and let it go into foreclosure what would be the irs ramifications?

second, if i file bk ch7 and surrender the second property because im filing bk, what would be the irs ramifications? thanks

smithsussane · Posted: Thu Dec 10, 2009 2:11 am Post subject:

Hi eddyincali!

Welcome to forums!

If you walkaway from the property, it would be foreclosed by the lender. You will have to pay the deficient balance resulting from the sale. If the lender forgives the deficient balance, then you would be responsible for paying taxes for the forgiven amount. However, depending upon the Mortgage Debt Relief Act in your state, you may or may not have to pay the taxes.

If you file Chapter 7 and surrender your property, then too the lender would foreclose the property. In both the cases, your credit will be lowered by 250 points. However, in case of bankruptcy, you won't be responsible for paying the deficient amount.

Feel free to ask if you've further queries.

Sussane

Guest

now, in the case of bk, would I still be responsible to pay the IRS any kind of taxes?

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