How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask cfortunato Your Own Question
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
Type Your Bankruptcy Law Question Here...
cfortunato is online now
A new question is answered every 9 seconds

I have 3 properties in California. One is a single family residence

Resolved Question:

I have 3 properties in California. One is a single family residence and the other 2 are condominiums. I live in one of the condos.

Can I foreclose on the 2 condos, but keep the house without declaring Bankruptcy?

If I do that, will I owe taxes on foreclosed properties (the difference between the loan amount and the sold amount)? Could you cite the references so I can read the actual laws wherever possible.
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 5 years ago.

Hi JACustomer,

1) How much equity - if any - does the house have?

2) Are you currently insolvent? (Insolvent means your total debts - including the mortgages on your real estate - exceed the total value of your assets - including the market values of your real estate.)

3) If insolvent, what is the difference between your total debts and total assets?

Customer: replied 5 years ago.
1) I owe $437,000 and it's worth about $450,000

2) Total Debts
House 1 = $437k (value = $450k) - a rental
Condo 1 = $319k (value = $180k)- a rental
Condo 2 = $392k (value = $160k) - my residence

Total owed 1,148,000 --> total value = $790k
3) difference =(-)$358,000

I'd like to keep the house, but it seems that the condos won't be worth anything for 5 or more years (due to the foreclosures in the area).
Expert:  cfortunato replied 5 years ago.

1) Given the information you provided, if you allow the 2 condos to foreclose, you would be able to keep the house, because it has less than $75,000 equity. This is per California Civ. Code 704.730, which can be viewed here:

2) If you are issued a 1099-C (Cancellation of Debt) for either foreclosed condo, you would not have to pay income tax on the cancelled debt that is less than the amount by which you are insolvent. In other words, if the cancelled debt totaled less than $358K, you would not have to pay tax on that amount. Here is the information about the income tax liability for debt forgiveness:


I think this is what you wanted to know. If not, please let me know.
Thank you!





cfortunato and 5 other Bankruptcy Law Specialists are ready to help you

Related Bankruptcy Law Questions