I am in NJ. If I walk away from a condominium that is becoming financially unbearable afford/live and my mortgage company foreclosed on me, wouldn't bankruptcy chapter 7 protect me from the lender trying to go after me. I am currently underwater, a property that is less than 200,000 in value and I owe the mortgage company about 300,000. For this reason, I am assuming that there is going to huge deficiency after any sale. I would like to know if the bankruptcy filing would protect me from the mortgage company to go after any deficiencies. Also, I have some credit cards debt and would like to know and would like to know the possible tax consecuences of discharges of mortgage and credit card debts during a bankruptcy. wouldn't the IRS treat the discharges of debt as income to me and tax me on the amounts that get eventually discharged? What is the best way to protect from the IRS and lenders or best way to go about it. Any recommendations appreciated and recommendation of attorney in NJ also appreciated.
State/Country relating to question: New Jersey
Exploring options right. Tried to modify last year with lender but they gave me hard time and disqualified me.
If you file bankruptcy before the property is actually foreclosed, then the discharge in bankruptcy also discharges the associated tax obligation. Also, until Jan 1, 2013, IRC 108(a)(1)(E) protects homeowners from being taxed on a discharged debt secured by the taxpayer's principal residence. Re the debt itself, the bankruptcy prevents the lender from attempting to try to collect any unpaid deficiency balance on the loan.Re the credit cards, the discharge in bankruptcy also discharges the tax liability associated with the forgiveness of debt. In short, based on your stated facts, Chapter 7 appears to be a very good plan for you.Hope this helps. NOTICE: My goal here is to educate the public about the law. Please help me in this effort by clicking Accept (or, click on one of the happy smiley faces/stars/etc., if applicable) for my Answer to your Question. If you have a subscription account, clicking Accept does not create any additional charge. It merely gets me credit for my Answer. And, if you need to contact me again, please put my user id at the beginning of your question ("To Socrateaser"), and the system will send me an alert. Thanks! Please Click the following link for IMPORTANT LEGAL INFORMATION.
Attorney and Real Estate Broker -- Retired (mostly)
DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.
The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).