Under normal circumstances, when you go through a foreclosure, the amount of the loan which ends up being cancelled or forgiven ends up being reported as taxable income
to you. However, due to the recent mortgage lending crisis, Congress has passed legislation which allows homeowners who go through a foreclosure on their primary residence, to excude this forgiven debt from their taxable income. This exclusion applies to foreclosures on your primary residence which occur through 2011.
As far as the loan balance owed to the bank, you will have to check the details of your loan agreement to see if you have a recourse or non-recourse loan. With a non-recourse loan, that means that the bank has no recourse to collect the money, other than foreclosing on the property
and keeping the proceeds from the sale. If you have a recourse loan, that means that the bank could file suit in court to try and obtain a judgment against you for any amount of the mortgage that was not covered by the sale. If they would win their lawsuit, then they could place liens
or levies on your other assets
. If your husband's name is XXXXX XXXXX mortgage as well as your name, then they could go after the assets of both parties.
You should be able to read through the terms of your mortgage agreement to see if you have a recourse or non-recourse loan. If you are unable to determine this on your own, you should simply call the lender and ask them to verify what type of loan you have with them on your mortgage.
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Thank you paulie.