If foreclosure is not completed by endits expiration datebut is pending, is this still covered under the Mortgage Debt Relief Act ?

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If foreclosure is not completed by endits expiration datebut is pending, is this still covered under the Mortgage Debt Relief Act ?

I know the Mortgage Debt Relief Act is set to end by the end of next year. I want to walk away from my house and get it foreclosed by then but if its stuck in the foreclosure proces and has not foreclosed by that time, does it still count as a foreclosure? If it doesn’t foreclose before the law expires, am I now going to be taxed for the cancelled debt? Is the Mortgage Debt Relief Act going to be extended?

Asked on December 6, 2011 under Real Estate Law, California

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Good question, at present, the Mortgage Debt Relief Act runs through 2012. If real property is not foreclosed upon by the lender through the end of 2012, the foreclosure does not apply under the current act. The act was extended once before and general consensus is that it very well could be extended again beyond 12/31/12.

If the act is not extended beyond 2012 and your home is foreclosed upon after 12/31/12, very well the forgiveness of the loan could be taxed as income to you.

I suggest that you consult with a real estate/tax attorney further about your question.


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