Running out of time - Foreclosure and 2013 new tax consequences!!!

[Anonymous]

Please help me!  I filed for Ch7 Bankruptcy during the middle of 2011 and the BK was discharged in November of 2011.  I included my primary home in the BK.  I am currently still living in the home and neither the first or second mortgage have foreclosed on me.  I have not received any contact from the 1st mortgage and the 2nd mortgage calls me about once a week with a recorded message wanting to know my intentions with the property.

I just saw on t.v. that after 2013, if you foreclose on your home you will be responsible for paying all of the taxes on the foregiven amount since the forgiveness tax will expire at the end of this year.  Will I be responsible for paying the tax on my home even though I included in the bankruptcy?  I am extremely worried because I owe about $550K on the house and it is only worth about $300K.  I live in California and if this is the case I will probably end up owing around $50K in taxes for the forgiven amount.  Or am I exempt because the house was included in the Bankruptcy??  If needed, I will need to have the property foreclosed on before the end of this year so that I will not be given the tax consequences.  If not, I would like to continue living in my home rent free until they foreclose on me.

Please help!!!

[StartingOver10]

You are safe! That is one of the most powerful things about getting a successful discharge in BK, you won't be taxed on the discharged debt. Talk to your BK attorney or your tax professional for details.

[beb86]

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@StartingOver10 wrote:

You are safe! That is one of the most powerful things about getting a successful discharge in BK, you won't be taxed on the discharged debt. Talk to your BK attorney or your tax professional for details.

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+1 its a totally different Bear than settling a debt and having to pay taxes on that difference 

[chasmith]

Your house wassn't included in your bankruptcy, the debt on your house was.  So, you don't owe any money on either loan because the loans were discharged in Bankruptcy.  If your BK was discharged in 2011 that was a 2011 Tax year event.  Debts discharged in BK aren't taxable, that's part of normal tax law, not the special temporary provision.

The lenders retain their security interests in the property.  The potential downside of you living in the house and no foreclosure is that if you wanted to buy another house you have to wait at least three years from the date when the deed was transferred out of your name. 

The second mortgage holder isn't going to do anything based on the negative equity - to gain title to the house they would hgave to pay out the first mortgage holder.  When the firt mortgage holder gets around to foreclosing that foreclosure extinguishes the second mortgage holder's security interest.