Avoid Foreclosure In Minneapolis Now... Why Use The 1099 Tax Form?

If you want to be in a disturbing situation the quickest way to get into trouble

is when you do not pay your mortgage and the bank sends you a foreclosure letter. This can be a really stressful time for anyone as it hits you from all angles: your lose your beloved home, your credit rating crashes, and you end up footing the bill as well. To save your home or property as well as your credit rating you may want to consider doing a short sale, which is a step to avoid foreclosure in Minneapolis so you can have a chance to protect your credit rating and keep your home.

In essence, during a short sale, this transaction lives up to its name because the purchase price agreed upon is much lower than the amount owed on the mortgage. When market conditions cause home values to decline, a short sale occurs in which a bank agrees to take less money for a property than the amount owed on the mortgage; if the amount owed is $100,000, the bank may be willing to 'short sale' it for just $80,000 as banks generally do not want to own real estate, and would rather settle for less money from an able buyer. This yields to a 20% discount for the buyer. However, you will still need to deal with that remaining debt.

The difference between the short sale price and the original mortgage can be addressed two ways. Either of these two options will result in you owing a considerable amount of money. The lender can opt to file a deficiency judgment against you to pay the remaining debt or send a 1099-C form so you must pay taxes on the amount forgiven. In our example above, the deficiency judgment would mean you still owe the remaining difference of $20,000 to the mortgage company. A 1099-C would mean you pay taxes on the $20,000 just as if you earned it as income.

After you avoid foreclosure in Minneapolis with a short sale the mortgage company could file for a deficiency judgment against you. If a deficiency judgment is filed against you, you can think of it as being mandated by law to pay off whatever balance remains from your previous mortgage. In many cases lenders know you can't pay so they don't file a deficiency judgment. In other cases an experienced Realtor and their team (including attorneys) can negotiate with your lender to avoid foreclosure AND avoid a deficiency judgment too! If they don't file against you, the next step for the mortgage company is to send you a 1099-C and consider the $20,000 their loss and your gain as income.

In the event you do receive a 1099-C form in lieu of a foreclosure deficiency judgment, you will have consult a tax professional to confirm whether you qualify for the Mortgage Forgiveness Debt Relief Act of 2007 that will eliminate paying taxes on the amount stated on the 1099-C. If you lived in the home as your primary residence you more than likely qualify. If you had second mortgages or a Home Equity Line of Credit (HELOC) on the home this will complicate matters. Again it is best to consult a tax professional to be sure you have all the information. If you do have to declare the deficiency as income, you'll owe 15 to 30% of it to the IRS. There are other plans you can use to avoid paying taxes on the amount forgiven, like insolvency, that your tax professional can talk to you about.

In order to avoid foreclosure in Minneapolis with a short sale, you will be able to save part of your credit but there are additional challenges to overcome. Using a Realtor who is a Certified Distressed Property Expert can help you get through the short sale and also avoid a deficiency judgment and avoid paying taxes on the amount forgiven. Although it takes a bit of time, it's a small investment to save yourself from the damage of a foreclosure.

To find out more about this subject and for tips and strategies...avoid foreclosure in Minneapolis now. Contact us and get all the assistance you need: avoid foreclosure in Minneapolis.

by: Nate Gerard

POST COMMENT

Watch Detroit Lions vs Tampa Bay Buccaneers Live NFL Free FOX Streaming|Nfl Week-15 Free Streaming Video,Fixtures,Scores and Result Obamacare Medicare Tax Not Too Hard On Llcs Are Your Taxes Done? Importance of Defending Tax Evasion Charge Watch Chicago Bears vs Minnesota Vikings live stream NFL on 20-12-2010 | NFL Monday Night Football Starting A Career As A Tax Attorney Donate Wisely And Save On Your Taxes Woodson Wins Nfl Defensive Player Of The Year Award QROPS Dubai - Flexibility With 0% Tax Reduction Option A Fresh And Green Way To Pay Your Taxes FAQs For E-filing Your Tax Return New Tax Law: What Does It Mean to You? Simple Ways Of Avoiding Tax Penalties