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My ex partner and I bought a condo in Atlanta, Ga. However, we were forced to move because our jobs were ending and moved to Chicago because of job offers. We tried for two years to sell the property. We finally took it off the market and got approval from our HOA to rent the condo out. This helped us a little with the payments. Our mortgage is over $18,000 and the people renting the unit is paying $1,100. This does not include our HOA fees. We are now 4 months behind. We have been paying some but not the full amount each month. I have spoken to one bankruptcy attorney and he said I should file a chapter 7. However, I’m current on everything else and have had very good credit for a long time. I have no credit card debt. All I have is this mortgage that I no longer can pay and on a condo that I will never return too. I also have a car payment. I have tried to work with Wells Fargo to do a loan modification, we were rejected. The loan is for $254,000 and it’s currently on the market for $185,000. It’s been on the market for over 100 days and not one person we have yet to find a potential buyer. Now I have requested a deed-in-lieu. I’m told that I should file a chapter 7 bankruptcy otherwise the IRS will come after me and the bank may come after me for the difference. I need serious help and advice as I do not know what my options are. I don’t own any other properties and am wondering if my condo is considered an investment property even though we did not buy it for that reason. We have never made any money from the renters. Even though we were forced to move for jobs does this mean that our apartments is considered our “second” home?? I can’t seem to find anyone who can tell me if I qualify for the debt relief act of 2007. Can you help me or help me get in contact with someone who can help me?
The debt relief act will NOT apply to you as the condo is no longer your home. In a deed-in-lieu or a short sale, the mortgage holder has the option to issue you a 1099 at the end of the year for the amount that they lost on the condo. That amount then becomes taxable income to you. As part of a deed-in-lieu or a short sale, you need to make sure the mortgage holder is NOT going to issue you the 1099. Otherwise, you’ll be stuck paying the tax. If that’s the case, then a BK is your other option. It ruins your credit, but you’ll be able to just forget about the condo and walk away, assuming you are eligble for a chapter 7. If you aren’t, then you’ll be in a chapter 13, which would be a horrible situation. Regardless, you are going to take a huge hit because of this condo. You need to talk the mortage company first about your options with them and if they won’t be reasonable, then a good bankruptcy attorney would be my very next call.
It sounds like the condo is not your home period. If you are renting it out, it is investment property. So the debt relief act would not apply. The difference between what you owe and what they sell it for in foreclosure would be considered taxable income.