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Good evening. New York, unfortunately, is a deficiency state...which means the lender can pursue you for the deficiency...the amount owed over the amount of the foreclosure sale. Whether or not they will depends upon their assessment of the collectability of a deficiency judgment. So, if you can convince them you have nothing for them to get, and that if they were to pursue a judgment, then it is unlikely the lender will spend the time and money necessary to get a judgment they believe is uncollectible in the end. Alternatives would be a deed in lieu of foreclosure, in which the lender would save the time and costs of foreclosure by simply accepting a deed in exchange of releasing the borrower from the debt. A third option is a short sale where the lender has to agree to accept a lesser amount to release the lien when it is not being paid in full.
The news on the tax side is good. Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, taxpayers may exclude debt forgiven on their principal residence if the balance of their loan was $2 million or less. The limit is $1 million for a married person filing a separate return. Details are on Form 982 and its instructions.
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Before the bank will consider any of them, the borrower will need to stop payments. The bank will simply not consider anything with a performing loan because they have no incentive to do so. I would recommend missing some payments, and then proposing a deed in lieu of foreclosure. If the lender is unwilling, I would simply let them foreclose. In the interim, he should also stop paying property taxes and HOA fees as these run with the land and are not personal obligations.
Would NYS garnishee both paychecks as the property is owned jointly.
I don't know that they will, but they can!
How long can the bank try to recover its money. It seems if the bank accepts one of the 2 options you mentioned that they would not have further recourse?
Would it be a release that they would sign
Yes, once they get a judgment, they can have the sheriff serve a summons on the debtor for a debtor examination. That forces the debtor to meet the creditor in court and answer questions under oath about their assets. After the creditor obtains that information, the creditor has the power to garnish wages, attach bank accounts, and/or have the sheriff seize other personal property to satisfy the debt.
I would appreciate it if you would please click the GREEN ACCEPT button so that I receive credit for my work; otherwise, though you have made a deposit, I do not receive credit.