If you owe a debt to someone and he or she forgives it, that amount could be taxable.

The Mortgage Debt Relief Act of 2007 lets taxpayers exclude income from the discharge of debt on their primary residence. Forgiven mortgage debt from a foreclosure and reduced debt through mortgage restriction both qualify for relief.

If your debt was forgiven between 2007 and 2014, up to $2 million of it is eligible for this exclusion. If the discharge of debt is not directly associated with the home’s declining value or the taxpayers financial situation, the exclusion does not apply.

That said, here are a few key points regarding the cancellation of debt.

Cancellation of Debt: What is it?

When you borrow money from a lender, you are not required to include the income from that loan for tax purposes because you are obligated to repay it. But if a lender forgives or cancels that debt, you could be responsible for reporting it. The lender will use a 1099-C form to report the amount of canceled debt to you and the IRS.

Example: If you borrow $20,000 and default on the loan after paying the lender back $5,000 of it, there will be a cancelation debt of $15,000 that could be taxable.

Cancellation of Debt Income: Is it always taxable?

In some circumstances, cancellation of debt income is not taxable. This happens if:

  • The debt is discharged through bankruptcy
  • The debt is canceled when you are insolvent
  • The debt is incurred while you are operating a farm
  • The debt is associated with a non-recourse loan

For more information about where you stand, contact a real estate attorney today.

Stephen K. Hachey, a Florida real estate attorney, can help your wade through this process and determine a positive solution. Contact him at 813-549-0096.

The opinions in this post are solely those of the author. The author takes full responsibility for the content. Like all blog posts, this is offered for general information purposes and does not constitute legal advice.

When the housing market crashed in 2007, millions of homeowners faced the risk of foreclosure as a result of declined property values and high unemployment rates. The worst part of the crisis lasted until 2009, and a year later the Obama administration launched the ‘Hardest Hit Fund’ to help those impacted the most.

The housing finance agencies that participate in the program have implemented a number of initiatives that help struggling homeowners recover from the crash. As of today, 18 states and the District of Columbia are taking advantage of the program.

What Kind of Help is Offered Through the ‘Hardest Hit Fund’?

Since each state’s Housing Finance Agency designs and administers its own HHF programs, all of them vary and are specifically tailored to the region they’re meant to help. No matter the variations in the programs by state, the purpose of each is to aid two types of people: unemployed homeowners who hope to remain in their home while searching for work; and homeowners who owe more to their mortgage lender than what their home is worth. The HHF has provided $7.6 billion in relief.

The most common programs associated with the HHF include:

  • Mortgage payment assistance
  • Principal debt reduction
  • Second lien loan elimination
  • Transition assistance

How Long Will the ‘Hardest Hit Fund’ Offer Help to Homeowners?

Each state’s participating Housing Finance Agency has until the end of 2017 to use the funds that were allocated by the government. According to the Department of the Treasury’s second quarter performance summary in 2015, there are 74 active programs helping homeowners across all 19 HFAs, and about $5.1 billion of the allocated funds – or 76 percent of the program cap – have been used for aid.

Stephen K. Hachey, a Florida real estate attorney, can help your wade through this process and determine a positive solution. Contact him at 813-549-0096.

The opinions in this post are solely those of the author. The author takes full responsibility for the content. Like all blog posts, this is offered for general information purposes and does not constitute legal advice.

When a house is transferred from the previous owner (the grantor) to the new one (the grantee), it’s done so with a property deed. Although there are many classifications for a deed, most property deeds are considered private. Deeds are also classified according to the type of title warranty that the grantor provides.

General warranty deeds offer a high level of buyer protection, while quitclaim deeds usually provide the least. A quitclaim deed is often used when a property is transferred between family members or to cure a defect on its title. In most cases, the parties involved know each other and accept the risks associated with it.

Since quitclaim deeds offer the lowest level of buyer protection, it’s important to know all of the nuances involved when purchasing a property this way.

Remember That a Quitclaim Deed Offers Minimal Protection

When using this non-warranty deed, the grantor isn’t required to make a promise or offer a warranty concerning the quality of the title. He or she only “remises, releases and quitclaims” his or her interest in the property to its acquiring owner.

Remember to Only Accept a Quitclaim Deed From a Trustworthy Grantor

Since the property’s grantee acquires no right of warranty against its grantor, it’s important to only accept a quitclaim deed from someone you know and trust. For example, when a married couple owns a property and divorces, one of the parties may use a quitclaim deed to eliminate his or her interest in the property. In another instance, a parent may use a quitclaim deed to transfer a property to a child.

Remember That You Can Use a Quitclaim Deed to Fix a Defected Title

In addition to transferring property, a quitclaim deed can be used to fix a defected title. This could include mistakes as simple as a misspelling or a missing signature.

Remember That a Quitclaim Deed Affects Owners and Not the Mortgage

Since the grantee of a quitclaim deed exposes himself or herself to certain risks, it’s often only used in transactions where there isn’t an exchange of money. That’s why quitclaim deeds aren’t usually used if there’s an outstanding mortgage on the property – and if they are, the grantor remains liable for the mortgage after transfer.

Stephen K. Hachey, a Florida real estate attorney, can help your wade through this process and determine a positive solution. Contact him at 813-549-0096.

The opinions in this post are solely those of the author. The author takes full responsibility for the content. Like all blog posts, this is offered for general information purposes and does not constitute legal advice.