Knoxville Short Sale Question: What Is The Mortgage Forgiveness Act?

tax-creditIn our Ask the Expert Section, we recently received a question from Joshua, he asks, "I'm in a difficult situation with my Knoxville home. I lost my job last year and have been working two part time jobs to help make ends meet. Unfortunately, it still hasn't made it possible for me to make my payments. At this point, I feel like a short sale my be my only option. I've heard that the Mortgage Debt Forgiveness Act was extended. Does this mean my lender isn't able to pursue me after the short sale is completed?" Joshua, you ask a valid question about Knoxville short sales. You are correct about the Mortgage Debt Forgiveness Act being extended through the end of the year. Unfortunately, the Mortgage Forgiveness Act doesn't prevent your lender from pursuing you for a deficiency judgement. The Act actually has to do with the income tax ramifications of short sales or pre-foreclosure sales. This means that any homeowner that completes a pre-foreclosure sale will not be required to pay income taxes  on the forgiven debt through the end of the year. To qualify, the home must be the primary residence, and can only be up to $1 million for those filing singly and $2 for those filing jointly. The extension of the Act is good news for you if you opt to do a pre-foreclosure sale this year. Luckily, there is still hope that your lender will waive the right to pursue you for a deficiency judgment. In many cases, lenders to opt to not pursue you. This information will be included in the approval letter given to you when the short sale is approved. A short sale gives you the best hope of not being pursued for a deficiency judgement since a lender can pursue you after the foreclosure process is completed. If you have question or concerns about the repercussion of a short sale, as always, be sure to consult with a lawyer. Are you a Knoxville homeowner facing foreclosure? Please do not hesitate to contact me by phone at 865-696-9002 or via email at [email protected]. My team and I are dedicated to helping homeowners explore their options to avoid foreclosure.  Also, be sure to check out our Knoxville Short Sale and Foreclosure Solutions Page.

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