Is Foreclosure Tax Relief At Risk?

In late 2007, Congress passed the Mortgage Forgiveness Debt Relief Act which frees troubled homeowners from paying taxes on forgiven debt. Before the law was passed, homeowners who lost their home to foreclosure or who sold their property via short sale could face a hefty tax bill.

Currently, 20 – 25 percent all homes are sold via short sale. Since a short sale occurs when a property is sold for less than the mortgage owed on it, sellers who use this method to avoid foreclosure could face large tax debts without the Mortgage Forgiveness Debt Relief Act. But allowing their home to fall into foreclosure won’t save them either without the tax relief law.  Without tax debt relieve, forgiven foreclosure debt will once again become subject to hefty taxes, if it’s the case, the affected ones will need to contact a professional accountant.

Being financially distraught and filing bankruptcy can be a very stressful and emotional time in one’s life. This is why it is necessary to hire a bankruptcy attorney that will make the process still a lot smoother. The last thing you need is paying someone for the little bit of money you have left and having the goofball never returning your calls.

When it comes to finding the proper bankruptcy attorney, remember that filing bankruptcy is a group project. To be successful, everyone needs to be on the same page and work together well. This includes the staff that works at the law firm. Nothing is worse than losing confidence in your bankruptcy attorney because you feel that you are not getting your questions answered and no one is paying attention to your concerns. Click here if you want to know more about the foreclosure assistance.

Before choosing an attorney, one should get themselves a basic education on bankruptcy filing. The easiest way to do this is spend a little bit of time online searching different websites that have information that you feel is applicable to your case. Make sure the information is current and local to the area in which you reside and will be filing in.

Now it’s time to interview a few bankruptcy attorneys. It is not totally necessary to interview more than one if you’re comfortable with the first one you meet. If there is any kind of tension or there are bad dynamics going on in the office, it’s best to look at a few others before making your decision. You have to remember that this person is in control of your financial destiny and you have to trust them fully.

If there is a lack of trust or communication problems, you should probably look for a different bankruptcy attorney. One should feel totally comfortable sharing all their information with their bankruptcy attorney. When someone is intimidated or embarrassed they might decide to hide information from the attorney that might be pertinent to a successful bankruptcy discharge.

Remember, you are hiring this person to help you not to impress them. Let the bankruptcy attorney decide what is important and what is not important. Throw all your cards on the table and let them shuffle them.

One thing that is irreplaceable with bankruptcy law is experience. Lately, with a large amount of people filing bankruptcy, many attorneys have added bankruptcy law to their practice. One should be careful because the new bankruptcy code has added complexity making experience a must. Make sure the attorney explains the entire procedure in layman’s terms not legalese. Before signing any retainer agreement make sure that you understand the terms and there are no hidden costs. If you feel comfortable discussing personal matters with the bankruptcy attorney, you might have found the one.

When filing bankruptcy timing is everything and the proper attorney will know exactly when to pull the trigger and when to hold off. The only way someone will know if bankruptcy will help them is to get their feet wet by interviewing a few bankruptcy attorneys.

The author started DebtFreeBankruptcyAttorney.Com which is a website that helps individuals with debt problems by putting them in touch with a local bankruptcy attorney that specializes in filing bankruptcy under Chapter 7 and Chapter 13 bankruptcy.

For example, a home with a $100,000 mortgage that was sold for $80,000 would have a deficit of $20,000 owed to the bank. The bank might forgive the $20,000 but the IRS would tax the forgiven debt as income. Under the Mortgage Forgiveness Debt Relief Act the IRS does not tax debt forgiven by the mortgage lender in most instances.  But this bill is scheduled to expire December 31, 2012. If Congress fails to extend the Act, thousands of homeowners could face a hefty tax bill next year.

To learn more about how the Mortgage Forgiveness Debt Relief Act impacts you, visit the IRS website.

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