- This topic has 4 replies, 1 voice, and was last updated 9 years, 10 months ago by Anonymous.
- May 14, 2011 at 6:49 am #210756AnonymousInactive
I am your regular college student who is looking for a credit card that in four years will give me a pretty nice discount or free flight to someplace far and exciting. What credit card has the best rewards for this?
- June 23, 2011 at 11:01 am #327124AnonymousInactive
You end up with a debt for the difference and no property.
- June 23, 2011 at 11:50 am #327125AnonymousInactive
They could very well forgive the debt under a short sale but they have additional options. One option is to send you a 1099 which would require you to pay taxes on the forgiven debt but under legislation passed earlier this year the tax code was revised so that you would not be required to pay taxes on the forgiven debt. They could also report the account as settled for less than owed and send the account to collections.
- June 23, 2011 at 12:38 pm #327126AnonymousInactive
If the bank (or mortgage holder) agrees to a short sale, you have to pay income taxes on the amount forgiven! The IRS ruled on this fairly recently. That amount could trigger AMT, which means if they “forgive” $ 50K, plan on paying IRS $ 25K. It also affects your credit.
Can you rent out the house for enough to cover the mortgage, taxes, insurance? Is there someone you thoroughly trust to manage this, or is there enough money to pay a realtor or real estate management company to manage the property (about 10% of gross proceeds), or are you moving somewhere close enough that you can check on the property once a month or so?
Since basically you pulled out all the equity with that second mortgage, that bill has become due and you’re going to pay now, one way or another.
- June 23, 2011 at 1:19 pm #327127AnonymousInactive
What you are talking about is a short sale. This is when the home sells for less than the combined debt and the bank agrees to take less than the full price. You will need to talk to the 2nd mortgage holder as they would be the one accepting the loss. You will still owe the difference, and if you don’t pay it will damage your credit and may prevent you from buying another house. I doubt they will out right forgive the overage, but they may work with you to stretch out payment over several years at a low interest rate or accept less than the full $ 45,000. If they do forgive all or some of the overage, be prepared to get a big tax bill at the end of the year. The government considers forgiven debt as “income” and will tax you on it.
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