8 Thoughts on Foreclosuing on 2nd home. What are the consequences other than Credit Score hit. Any Tax issues from I.R.S.?
  1. Reply
    July 18, 2011 at 3:12 am

    The foreclosure will stay with you for at least 7 years, I know, I had one in 2004 and it killed my credit completely. I also had to pay the property tax on my taxes the next year.

  2. Reply
    Gary K
    July 18, 2011 at 4:08 am

    I don’t think there will be any tax issues. There would be if they forgave the debt and let you keep your home.

    Forclosure will stay on your credit report for 7 years.

  3. Reply
    July 18, 2011 at 4:57 am

    Unless you have another place to live you might be homeless.

  4. Reply
    doreen k
    July 18, 2011 at 4:59 am

    Your credit score will tank, as you seem to be aware of. You probably will not be able to buy another home for 2-4 years, depending on underwriting standards at the time, which are in flux right now.

    Because the 2nd home is not your principal residence, you likely are going to face some tax consequences regarding the amount of the loan that is not recovered by the lender. For example, if you owe $ 200,000 on the home, and the lender only recovers half that amount in a foreclosure sale, they will send you a 1099-C for the $ 100,000 of the loan that was not repaid. You will be responsible for paying taxes on that $ 100,000 in cancelled debt.

    The law recently passed by Congress, which is the Mortgage Forgiveness Debt Relief Act, only applies to one’s PRINCIPAL residence. It will not cover a second home.

  5. Reply
    July 18, 2011 at 5:47 am

    If you are asking about having to file on Your income taxes, the difference between the lien sale price and the mortgage amount borrowed, not at this time.

    Congress passed a law forgiving the difference from foreclosures for the years of 2007, 2008, 2009, 2010. After that, back to business as usual. If you can’t afford the mortgage, you will take a really big income tax hit.

  6. Reply
    July 18, 2011 at 5:48 am

    Doreen is right and since it is a second home they may also come after you for the balance owed and even place a lien on the first home till paid and even attach a garnishment as well. But for sure you will get a 1099 and the IRS gets their money

  7. Reply
    Doctor Deth
    July 18, 2011 at 5:56 am

    you could get a a 1099 for “forgiven debt” and you would owe taxes on that – foreclosure will affect your credit for years –

  8. Reply
    Elizabeth M
    July 18, 2011 at 6:44 am

    My best suggestion is to look in an online yellow pages and find a tax service that has a specialty in what your question deals with. You can then ask them some quick questions to get more of an idea on what you need to do to figure out how long that would take, you will probably get more of a correct answer. There are some services in Lathrop like Liberty Tax Services : >

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