Hi. I've been reading and can't figure this scenario out for my own situation. I'd like a clearer picture before I start talking to my lender, lawyer, ex, etc., so any help is appreciated. Some details are below but here's my question: Will my ex-girlfriend owe taxes from a short sale of our jointly owned house because it is NOT her primary residence? From what I've read I think "yes" she will since I live there and she doesn't plus I'm doing a chptr7 anyway and she's trying to avoid filing for bankruptcy. Some info:
My impression is that even if the house was sold short she would be on the hook for cancellation of debt taxes from the short sale and I wouldn't, because it is NOT her primary residence and IS mine so I'm protected under the Relief Act (don't know if my chptr7 helps me in this aspect but I bet it doesn't hurt
). Is my impression accurate? close? way off? All insights are appreciated.
The upshot is that she, of course, would like as little a hit to her credit as possible so in her eyes a short sale is very favorable to a combo foreclosure/bankruptcy. But if a short sale is going to stick her with $60-$70,000 of taxable income and dealing with the IRS while I'm free and clear then she won't want to. Neither of us is going to "do" anything without our lawyers but I'd like to be educated on this before I talk to her next as I see this as being a crucial point that decides what direction we are going in. Thanks!
- I'm definitely doing a ch7 bnkrpt no matter what.
- I own one property. I bought it with my ex-girlfriend in fall 2006. I live there. She doesn't and hasn't since March 2008, so she actually lived in the house a total of 18 months. All of this is in New Jersey.
- In the 3 years since she's moved out she's claimed the house once on her taxes (it helped her return that year but not mine).
- She's married with a kid now and has moved a couple times.
- This house is almost definitely "going away" in some fashion fairly soon (6-12 months'ish): foreclosure, short sale, whatever. The slim chance it won't is if my lender refi's it completely and only in my name while cutting my principal owed in half even though I have worse credit and lower income then when I bought it (we'll see
) - The house is underwater: paid $144,000, average for comparable in my area is $65-70,000.
- Her and her new husband can't take over the house.
- I personally want to take the advice I see so often on this forum and others: don't reaffirm during the bankruptcy, time things well and ahead of time, live a while rent free.
- She would like to see the house go in a short sale in order to avoid having to file bankruptcy herself to protect herself from recourse from the foreclosure.
My impression is that even if the house was sold short she would be on the hook for cancellation of debt taxes from the short sale and I wouldn't, because it is NOT her primary residence and IS mine so I'm protected under the Relief Act (don't know if my chptr7 helps me in this aspect but I bet it doesn't hurt
). Is my impression accurate? close? way off? All insights are appreciated.The upshot is that she, of course, would like as little a hit to her credit as possible so in her eyes a short sale is very favorable to a combo foreclosure/bankruptcy. But if a short sale is going to stick her with $60-$70,000 of taxable income and dealing with the IRS while I'm free and clear then she won't want to. Neither of us is going to "do" anything without our lawyers but I'd like to be educated on this before I talk to her next as I see this as being a crucial point that decides what direction we are going in. Thanks!
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