If you are considering filing bankruptcy or moving forward with a short sale or deed in lieu of foreclosure you should speak to a bankruptcy attorney in your area. A recent article from the housing wire reports that a obtaining a short sale prior to filing bankruptcy may not help your credit score. The article reports that debtors FICO scores were very much the same when they compared somebody who obtained a short sale vs. somebody who had a home foreclose after filing bankruptcy. Debtors should also consider the tax ramifications of a short sale if the government has not renewed the tax relief exemption for allowing debtor who do a short sale to not be liable for paying taxes on the forgiven debt.
One benefit of obtaining a short sale in lieu of a foreclosure is that a debtor may be able to remain in their home for a longer period after filing bankruptcy. This is because the lender or bankruptcy trustee will try to find a buyer for the home, which can take some time, allowing the debtor to remain in the home without paying on the mortgage. Short sales in general may not be advisable outside of bankruptcy as the debtor will ultimately be liable for the taxes incurred on the difference between what is owed on the property and what the property ultimately sells for. For instance if a property sold for $100K and $120K was owed on the property, the debtors would be liable for paying taxes on $20K. Debtors need to evaluate whether a short sale would be in their best interest. If it is not, filing bankruptcy may have to be considered. In bankruptcy, a debtor may be able to surrender a property back to a lender, causing the property to foreclose, however the debtor would not be liable for any additional debt.
If you are considering a obtaining a short sale or a deed in lieu of foreclosure, contact Symmes Law Group at 206-682-7975 to learn about your options.
