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I live in California; I have a second home in which I lived in for 3 years. I can't continue making 2 mortgages anymore. I'm thinking of leaving the second home to foreclose because I'm $200,000 under water. I' not late in payments yet. Will the bank come after me for deficiency funds after the house is sold? Also would I have to pay taxes on that deficient amount or not? Will bankruptcy work best for me if I don't have any other debt besides my two home mortgages?
Thanks

Realgeni · Joined: 13 Apr 2009 Posts: 1434 99.76 Dollars($)

wory

Welcoem to the forum

Yes there is a good possibility that the lender will come after the deficient amount.

You do nto need to oay taxes on the deficient amount. The current law protectsyou and this expires in 2011

Cannot answer about your third question

Good luck

adonis · Posted: Tue Jul 14, 2009 10:53 pm Post subject:

Hi wory,

If you foreclose your second home, the lender will have the right to sue you for the deficient amount. As the lender will not forgive the deficient amount, you won't have to pay taxes on it. In case, if the lender forgives the deficient amount, you may have to pay taxes on that amount as it would be considered as your income.

In my opinion, it would be better if you could go for a deed in lieu foreclosure. In this process, your lender will sell off the property as will also forgive the deficient amount resulting from the sale of the property. There are chances that you won't have to pay taxes for the forgiven amount depending upon your state laws.

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