For many years, and for tens of thousands of consumers who were in foreclosure all across Florida, the easy resolution of the foreclosure case presented by the banks has been…
TAKE A DEED IN LIEU OF FORECLOSURE OR A SHORT SALE…WALK AWAY SCOTT FREE!
For some folks it was an ok deal. No more home, but no more liability associated with owning that home. Well all that changed effective January 1, 2014 when the Mortgage Debt Relief Forgiveness Act expired. After January 1, if a consumer took one of these deals, they are going to get hammered by federal income taxes when the federal government issues a 1099(c). The tax hit is going to come as a total and unimaginable surprise. How would you like to have walked away from your home only to find out the IRS wants to hammer you for $200,000 in additional income? Well, that’s going to happen. It’s going to happen to a whole lot of people.
So what’s the alternative? You’ve got to fight, fight, fight your foreclosure. With this new tax time bomb, for the vast majority of people a Final Judgement of Foreclosure and a foreclosure sale is going to be far more beneficial in the long run than a waiver of deficiency and a short sale.
Florida’s courts have not yet understood the impact this would have if consumers stopped falling for the siren song of the waiver and started deciding to take every case to trial…but that’s exactly what should be happening.