LANDLORD-TENANT LAW
Foreclosures
OWNERS
When facing impossible mortgage payments or when the home is worth less than the loan, letting it go to foreclosure seems like a good option, but is it? How do you protect your rights?
CONSIDER SAVING THE HOME
PROGRAMS TO SAVE THE HOME
There are programs available through FHA and other agencies to help you avoid foreclosure.
REFINANCE BUT BEWARE OF UNETHICAL LENDING PRACTICES
Beware of unethical or fraudulent lenders. These predatory lenders take advantage of people unfamiliar with loans and those put in crisis by impending foreclosures. They claim to be able to save your home but many times they really are working to take it away from you. Have any deal to save your home reviewed by an attorney or financial professional that you trust before you sign any loan or refinancing agreements.
BANKRUPTCY
For some people, Bankruptcy may be used to buy some time in the effort to save the home from foreclosure. Strict Federal laws on the subject make saving the home using this procedure much more difficult now than it used to be. Bankruptcy may assist in limiting potential tax or other debt consequences. Bankruptcy laws are complex and there are many considerations to review before taking this step. Seek the guidance of a competent bankruptcy attorney for advice before taking any such action.
LOSING THE PROPERTY BY FORECLOSURE
IMPACT ON CREDIT
A foreclosure can have a very negative impact on your credit for some time to come.
TAX CONSEQUENCES
In a nonjudicial foreclosure, your property may be sold for less than the mortgage being foreclosed on. That difference is called a forgiven or cancellation of debt but the forgiving stops there because the IRS does not forgive you. Welcome to the double whammy. Losing a property and getting a tax bill.
The IRS sees a forgiven debt as income which means you may be asked to pay the taxes on that income. For example, your property has a mortgage for $600,000.00. You let it go to foreclosure thinking you are walking away from the debt. The property then sells for $500.000.00 yielding a "forgiven debt" of $100,000.00. The IRS may see that as income and expect you to pay taxes on that income. Therefore, think carefully of the tax consequences before choosing foreclosure as an option. NOTE: We are not tax attorneys. The above is a general example which may or may not apply to you. Seek advice from a tax professional before making any financial tax related decisions.
TRUSTEE SALE
This is where a nonjudicial foreclosure auction sale occurs. If your home makes it to a foreclosure (Trustee) sale, and you could not prevent it, then you should appear to witness what happens. You will see who buys the home and for how much. These are important pieces of information that will come in handy.
FIRST, you will know who to communicate with to try and work out any post foreclosure deal like a rent agreement or a buy back of the home.
SECOND, you will know how much, if any, of the debt was forgiven so you can prepare for any tax consequences of the sale.
THIRD, if there was any fraud committed against you, (i.e. the bank said they would delay the sale but did it anyway) evidence can be gathered that may be used in a lawsuit you may file.
EVICTIONS
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California law for San Diego is applied in these pages. Such laws may or may not be applicable in other jurisdictions. The information provided herein is of a general nature and is not intended to be taken as specific legal advice. For legal advice in a particular situation, promptly consult with an appropriate attorney.