How can I file bankruptcy on a forclosure?
Last year my husband and I lost a home we purchased about 3 years ago. This house was to be an investment. We remodled the entire house and completed just as the market crashed. This past March the house was foreclosed on after being on the market as as short sale for 2 years. We want to file bankruptcy because this ruined our finances. We still have our home we live in but we now have 2 creditors suing us. How do we file for bankruptcy and include the taxes we will probably be charged for the house we lost in March 2010?
Posted May 28th, 2010 in When To File Bankruptcy. Tagged: 3 years, bankruptcy, creditors, short sale.
Depending upon your income, you can file a Ch 7, a discharge of MOST debts, or a Ch 13, which is essentially a repayment plan that lasts 3-5 years. After that time, the remaining debt is discharged. If you earn over a certain amount (this varies state to state) you may have to go with the 13. If not, you can go with the 7 but you may lose some of your personal property.
Now, as for the Foreclosure, you can discharge any deficiency judgment that may have been awarded to the bank after the foreclosure. This is the difference between what the bank gets when they sell your house and what you owed on the house. Example, if you owed 300K and the bank sold it for 100K, in SOME states they could come after you for the difference. (In California, for instance, this is usually not the case.) That difference could be discharged.
As for the taxes, you would have been "1099′d" for the gain you would have realized in the short sale. Check with a tax guy about this. You did not realize gain if the bank foreclosed and took the property. There is a difference in the tax liability here. But I’m not a tax guy.
The house you live in should be safe under either plan. It is defnitely safe under the 13. The 7 could be a problem if there is a lot of equity the trustee can get by selling the house. Again, this varies from state to state. But here is what you MUST do to protect yourself. If the people suing you get a judgment, that judgment could result in a lien on your home. Again, depending upon the state, that could result in an attachment and forced sale to get what is owed to them, or result in a lien that has to be paid off before you sell or refinance your home. You MUST do everything you can to avoid judgment on those suits. You can transfer your home into an irrevocable trust to protect it from creditors. You can also file your BK before they obtain judgment and extinguish that debt.
This is general information that you should not rely on. It is always best to consult with an attorney who knows the BK rules in the local District. Sounds like you have a lot at stake here. Don’t let the time go by without addressing the issues and protecting yourself.
Good luck.
May 28th, 2010 at 8:15 amThe first step is to get a lawyer.
May 28th, 2010 at 8:15 am