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Anne, Lawyer
Category: Legal
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Experience:  Trial Lawyer, 15 Years Experience
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helped a friend buy a house 3yrs. ago. just used my name ...

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helped a friend buy a house 3yrs. ago. just used my name and credit score. I was listed primary and she a co-owner. house is now in foreclosure process. not able to sell. i have several accts. with husband and concerned that our joint accounts may be attacked by bank. checking,savings, retirements,college savings for kids and any other asset
Submitted: 8 years ago.
Category: Legal
Expert:  Anne replied 8 years ago.

Dear Boston, Massachusetts:

I assume that the outstanding mortgage on the house is in excess of what it could be sold for.

If it is not too late, you may have time to arrange for a short sale. Even if foreclosure proceedings have started, this might be possible.

You will need to find a Realtor that is familiar with the process. Depending on the amount you are short, the lender may agree not to collect on the difference. However, keep in mind that if the lender agrees not to collect, you will be taxed on the difference. For example, if the house has a $200,000 mortgage and it is sold for $150,000, you would receive a 1099 at the end of the year for $50,000.

If the lender will not agree to forbear collecting on the difference, or it is too late to stop the foreclosure process, the lender may get a deficiency judgment against you and the other co-owner for the difference in the price. In the above example, if the house had a $200,000 mortgage and sold in foreclosure for $150,000, the lender could try to collect the $50,000 from you and the other owner.

You may be able to borrow enough to cover the difference and and pay it back over time. Therefore, you would not need to worry about your assets being attached.

If you can't, yes, you may need to worry about some of your assets eventually. However, attaching assets will take a judgment and a court order, so you should have some time. In lieu of that happening, I suggest working out a payment plan.

There are other options, such as a pre-foreclosure sale. You will need the cooperation of the lender and an experienced Realtor. There is also a deed-in-lieu of foreclosure, but the lender needs to work with you on that.

Rather than talking with just a tax preparer, I recommend that you talk to a CPA who has experience in personal tax issues and can advise you and your husband on the best course of action, tax wise.

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