St. Petersburg Bankruptcy Attorney
St. Petersburg &Tampa Bay Bankruptcy Defense Lawyer Meet Our Attorneys Bankruptcy Evaluation Frequently Asked Questions Bankruptcy Blog Contact Us
Bankruptcy Practice Areas
Contact Us Today




Bankruptcy Overview
Alternatives to Bankruptcy
Bankruptcy Myths
Bankruptcy Process
Bankruptcy Timeline
Benefits of Bankruptcy
Chapter 7
Chapter 11
Chapter 13
Creditor Harassment
DO's & DON'Ts
Deed in Lieu
Foreclosure
Life After Bankruptcy
Phone Call Harassment
Pre-filing Mistakes
Short Sale
Stop Creditors
Wage Garnishment
What Happens Next
When to File for Bankruptcy
Click here to be connected to our office
We are Members of the N.A.C.B.A.
503 E. Jackson Street Tampa, Florida 33602

Liability After Short Sale

A short sale has become an increasingly popular strategy among homeowners who are looking to avoid foreclosure. A short sale sells the property much earlier than in a foreclosure, and the home is sold for less than what the lender owes because the lender agrees to release the property as security for the debt. If your home has recently been sold in a short sale, you may be wondering if you still have personal liability.

The IRS addresses the Mortgage Forgiveness Debt Relief Act and how it affects cancellation of debt. If you owe debt to a commercial lender and the lender later cancels or forgives the debt, you may still be liable for taxes on the canceled amount. In the state of Florida, the borrower is forgiven the difference between the net proceeds of the short sale and what was owed on the mortgage, but the difference will still be considered income by the IRS. There are certain exceptions that apply, such as taxpayers who were forgiven part of their mortgage on their former residence.

Also, if the lender goes through the foreclosure process and obtains a final judgment, a "sheriff sale" of the property will usually occur. When this happens, the taxpayer is not considered to have been forgiven any amount of the mortgage debt and there is no tax liability. This occurs because a sheriff sale is considered a forced sale rather than the borrower negotiating with the lender.

If you are considering a short sale, it is important to contact your bank and to get approval before you go through with a short sale. The bank must approve of the amount and sometimes the process of settling on an amount requires extensive negotiation. Contact a St. Petersburg short sale attorney at our firm for experienced help with short sale or other debt problems. With the assistance of a St. Petersburg bankruptcy lawyer, you can be confident that you are making the best decision for your future.

Categories: Bankruptcy

The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.