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Mr Credit Score... Meet Mrs Foreclosure and Her Prettier Sister Miss Short Sale
2012 Jan 4, 5:32am 1,499 views 3 comments
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PockyClipsNow
2012 Jan 4, 6:39am
Good luck to you!
youWalkAway.com has a message board/FAQ I think.
maybe these links will help shed light on what 'the banks/government entity' might do to you if it can.
dont forget to research tax consequence for the 'defaulted on debt' or deficiency or whatever its called. BIG ISSUE. massive $$ at stake there for you.
http://www.bankruptcylawnetwork.com/short-sales-foreclosures-credit-scores/
http://www.bankruptcylawnetwork.com/bankruptcy-and-short-sales-california/
I remember the last crash which peaked in 89/90 in CA and hit bottom in 1996- in 1996 I worked with a dude whose late wife was a realtor. She had flipped a ton of homes, then lost a bunch to foreclosure, they declared Bankruptcy. BUT the surviving spouse (who was clueless about real estate he was a dorky computer guy) was then on the hook for a HUGE tax bill for the defaulted debt - he said 20 years of tax liens till he was free - he lived in an apt with his kid and did not drive a car due to being broke 4eva.
You are lucky George Bush signed some law in his last year forgiving tax debt on defaulted debt (it counts as income! taxed at w2 rates I guess) anyway that option expires in 2012 I think.
Its probably already too late for most people still making payments on an underwater home to avoid the tax debt (which cannot be discharged in Bankruptcy) if they decided today to stop paying. The reason is average Foreclosure takes years now and so you might have the defaulted debt 'dated' at 2 years from now and miss the get out of jail card.
We are talking about a lot of $ here - think of paying income tax on a 300k lotto win(im figuring in LA the median priced house in 2006 was about 600-700k so the bank loses 300k and reports it as income to the IRS- you might owe 100k ez here. For most people this probably means wage garnishments for ever.
dont forget to research tax consequence for the 'defaulted on debt' or deficiency or whatever its called. BIG ISSUE. massive $$ at stake there for you.
This is a large issue that is inherently wrong with the tax code. It is counted as income, but is really only FORGIVEN DEBT! Which the Ex-Debtor has been released from, by way of giving back property which had encumbered proceeds from the loan, and the Ex-Debtor comes out with NOTHING! (Speaking of Real Property). How is this allowed to be taxed? Why are taxpayers not up in arms? The Financier regains the real property and takes a "Loss" (Fictitious value at best over the last 10 years) while you are forced to pay the government for supposed income which neither the Financier nor yourself obtained? This is criminal. How did we allow our politicians to remain politicians when they agree to tax codes like this???? I understand that currently the suspension of collection of this tax is in effect, but in all honesty, it should never return!
Hi folks,
I'd like to bring up the topic of credit score when it comes to the following:
1.) Foreclosure
2.) Short Sale
Can anyone help me quantify the credit score hit and time duration for each of the two categories above?
Obviously, the short sale will result in a lesser credit hit, but is it wishful thinking to assume that an individual can carry out a bank approved short sale and turn around and buy a new property at the advertised 30yr fixed rate with 20% down the week after the short sale closes assuming all their typical ducks are lined up (available funds are present, steady job, etc)?
Also, what are the requirements for a bank to approve a short sale? Is it simply that the property in question is worth less than the loan amount, or do you actually have to show financial hardship? If so, how is that quantified?
#housing