Deed in lieu vs foreclosure or bankruptcy

Guest

Husband and Wife - 66 yrs. and 62 yrs. old. Lost our jobs, living on savings. Can only last 8 more months on our savings. Cannot sell our house. Have no other loans except house. What should we do, file bankruptcy or when our savings run out let the bank foreclose and loose our home.? We have an interest only loan. Still owe $800,000.00 on house.

adonis · Posted: Fri Jan 30, 2009 12:13 am Post subject:

Welcome Plato,

I can understand that you're going through a tough situation. Are you still current on your payments? If not, then you may request the lender for a deed in lieu.

In deed in lieu, your property will be sold by the lender to recover his debts. The deficient amount from the sale of the property will be forgiven. But it will lower your credit score by around 250 points.

If you are current on your payments and want to save the property, then you can try to refinance it at a lower rate.

Guest

But if you do a deen in lieu you receive a 1099 at the end of the year which is considered a gift and is taxed @ 25%, correct?

jameshogg · Posted: Mon Oct 05, 2009 11:58 pm Post subject:

Hi Hope,

In case of a deed in lieu of foreclosure, though the lender forgives the deficient amount, you won't be liable to pay the taxes as per the Mortgage Debt Relief Act. To know more about the Mortgage Debt Relief Act, check out the following page:
http://www.mortgagefit.com/california/debtrelief-act.html

Thanks

All times are GMT - 7 Hours
Previous 1 2
Page 2 of 2