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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 37822
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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I have a second home with a first mortgage of 118K remaining

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I have a second home with a first mortgage of 118K remaining at 4.375% fixed 15 year (7 years left on that)pmts are 2500/mo. A second mortgage on the house 361K for a business that went belly up. paying 1% over prime interest only 1200/mo at present. (total debt on that home is ~480K home might only sell for 300K now) Primary residence is ~ 112K left to pay over next 7 years at 4.375 fixed. I have an equity line of 30K on that house but no outstanding balance on it. I have no crdit card debt and no car payments for my family. My husband in unemployed and inelligible for unemployment because he was self employed & we filed as an S corp. All in all, I am finding my self incapable of keeping up with the payments. I have asked the bank to help me (executive banker by phone) who said my interest rate is already good and I have not missed a payment. I have received advise from both her and an accountant to miss payments & try to short sell. I dont feel I can suport pmt long enf. FORCLOSE?
Submitted: 7 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 7 years ago.

Your primary residence is exempt from creditor attack, thanks to Florida's liberal homestead laws. So, you don't have to worry about losing the home, as long as you aren't in debt to Uncle Sam.


If you allow the 2nd home to go into foreclosure, or to a short sale, you will receive cancellation of debt income from the lender by way of a 1099c. So, the only thing that the short sale really buys you is a smaller tax bill. At $180,000, it could be $50,000 in taxes, if you're foreclosed -- not a pleasant prospect, but you could probably work out a payment plan with the IRS, or you could try to borrow against the primary residence and pay the government off.


The short sale is a better deal, but only if the net outcome is a smaller 1099c. Otherwise, the result will be identical.



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