Short Sale Question..Please help

[Newlife29]

I was hoping someone could help me out on this question....My wife and I might be going down the BK route in the near future. We have a lot in CC debt and unsecured loans. My major question is that we own a primary residence right now that we will be trying to sell in the near term but there might not be enough equity in it to sell with the 1st and 2nd mortgage. My other major question is that I bought a condo down in Florida back in 2005 with my mother that is well under water. I guess the questions would be.

1. If I sell my primary residence for less than what I owe (short sale) then will I be responsible for the difference. meaning will I be 1099'd for it? or WOuld a BK wipe that out?

2. Also same question on a 2nd home condo down in Florida? Do the same rules apply for 2nd homes?

3. My mother does not want to have go BK unless she has to. If we short sale the FLorida property and are underwater by 100K then will the bank go after her for the difference unless she goes BK?


Thanks in advance for anyones help

[justbroke]

1. If I sell my primary residence for less than what I owe (short sale) then will I be responsible for the difference. meaning will I be 1099'd for it? or WOuld a BK wipe that out?

BK would "discharge" the debt, thereby wiping it out. You could also have the resultant 1099-C deemed non-taxable (by the IRS), if you meet certain conditions. Bankruptcy and insolvency are two of those conditions!

2. Also same question on a 2nd home condo down in Florida? Do the same rules apply for 2nd homes?

Yes.

3. My mother does not want to have go BK unless she has to. If we short sale the FLorida property and are underwater by 100K then will the bank go after her for the difference unless she goes BK?

Yes, they can. The Bank will get permission to pursue the co-debtor and in all likelihood will be granted permission to do so.

What will probably happen, is the Bank may find it's not worth the trouble to pursue it and just sell the debt to a JDB who will aggressively attempt to collect it from your Mom.