Most in Akron who face mounting debts will do all that they can to settle those expenses while avoiding bankruptcy. Fortunately for them, a number of federal and state programs and initiatives are in place to provide them with debt relief. For most, one of the largest debts they will assume is their mortgages, and when they encounter financial struggles, that is often the expense that they have the most difficulty in meeting. For those struggling to meet their mortgage payments, there are ways in which they can work with their lender to arrange a deal where a portion of their mortgage is forgiven while still helping them to avoid foreclosure. Yet one of the means of assistance that makes this option attractive to borrowers may soon be going away.
The Mortgage Forgiveness Debt Relief Act is soon set to expire, which means that the tax protection provided by this program could soon be gone, exposing borrowers to potentially enormous tax bills should they file for mortgage forgiveness. The relief provided by their forgiveness agreement would count against their income, potentially pushing them into a higher tax bracket.
It often seems that programs and rulings such as these can have unintended consequences to those that they were intended to benefit. The last thing that those seeking debt relief need is to trade in one expense for another. As such, those seeking such relief may be well served to speak with a bankruptcy attorney to discuss which of the options available to them will most help them to once again secure a firm financial footing.
Source: New York Daily News “Loan and groan: Distressed homeowners who get mortgage relief are about to get hit by a big fat tax bill” Phyllis Furman, Dec. 17, 2013.