Will the Debt Forgiveness Act be extended for Short Sales?

As we approach the last quarter of 2012, homeowners who are in distress are concerned and asking about whether or not the Debt Forgiveness Act of 2007 will be extended.  If homeowners do not close by December 31, 2012, will they owe taxes based on the debt that the bank is forgiving or not?

Unfortunately, we do not have an answer to this question for Elk Grove short sale sellers.  For homeowners who cannot afford to continue paying their mortgage payments, have not been able to get their bank to modify the terms of their loan or simply must move with an upside down mortgage, their only choice is foreclosure or short sale.  If this occurs after December 31, 2012, the homeowner who has now lost their home, may also face a huge tax liability or may have to file bankruptcy.  This is why the extension of this act is so important.

Attorney, Steve Beede of BPE law firm, explains it best in his recent newsletter….”I am informed that there are five separate measures moving through Congress to extend the Act. None of these are readily identifiable but are instead riders which have been attached to existent Bills. In August, the Senate Finance Committee approved a bipartisan Bill that would extend the Act through 2013. That is now being debated in the Senate. Similar measures are moving through the House of Representatives including one Republican-sponsored Bill introduced by our local representative Dan Lungren. If the best of these proposals reach President Obama’s desk he is certain to sign since his own Budget includes an extension through 2014.  Gov. Romney has not stated an opinion on the subject.”

With the two parties fighting in both Congress and the Senate to keep control, is it possible that they may not come to an agreement on which bill will and should be passed to extend the Debt Forgiveness Act?  We are all waiting nervously to find out.

 

 

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