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socrateaser
socrateaser, Lawyer
Category: California Employment Law
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Experience:  Retired (mostly)
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I am 64 years old and in the process of layoff and retirement

Resolved Question:

I am 64 years old and in the process of layoff and retirement simultaneously. I own a Condo in San Pedro, CA. I owe $360 however the last appraisal only came in at $250k. No one will refinance and I will not be able to continue with the mortgage payments once I retire. My Mortgage is $2350 monthly which includes taxes and PMI. On top of this I have to pay an Association Fee of $317 monthly. My question is, if I allow the Condo to go into Foreclosure, can anyone come after me for the difference of sale price and what I owe. Will the IRS count it as additional income for the year?
Submitted: 5 years ago.
Category: California Employment Law
Expert:  socrateaser replied 5 years ago.
My question is, if I allow the Condo to go into Foreclosure, can anyone come after me for the difference of sale price and what I owe?

A: If you have only one loan against the property, then Cal. Code of Civil Proc. 580b; 580d, 580e and 726(a), combine to prevent the lender or any debt collector from attempting to recover the unpaid loan balance.

However, if you are delinquent on your HOA assessments, the HOA can sue to recover any unpaid balance. This is usually not a risk, because when the new buyer comes in, the bank will make them pay off the HOA fees. But, legally, you could be sued during the time that the property sits empty.

Will the IRS count it as additional income for the year?

A; No. Neither will the State Franchise Tax Board. As long as the foreclosure occurs prior to Jan 1, 2013, which is the date when the tax breaks expire (IRC 108(a)(1)(E).

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