foreclosure negative equity
How does foreclosure affect a divorce?
I am currently going through a divorce. I am trying to keep the house, since it is my name only, but still is community property. With today’s market, I am $100,000 upside down. Should I foreclose, does any one know: 1) How long would it take me to recover on my taxes, and 2) Would my wife be responsible for 50% of the NEGATIVE equity, even if I rent a room out and can manage to stay. I know that she would get 50% if I was in the positive, just didn’t know if it worked the other way too.
1. You shouldn’t have to recover anything on your taxes if the house just goes into foreclosure. In terms of property taxes, if you get behind on those, they will be paid from the proceeds of the sheriff sale before any money is paid to the mortgage company. If you are talking about getting a 1099 after the foreclosure for the loss, that does not happen if a full foreclosure. It only happens if you use a short sale to stop the process before the auction. Since you don’t have an agreement with the bank to forgive the debt without a short sale, there is no taxable income to you.
2. I assume you’re talking about a deficiency judgment, where the bank would sue you after the foreclosure for the amount that was not paid off by the sheriff sale. The bank could try to name her as a defendant, as well, if they decide to pursue that option. However, banks almost never sue their former clients after foreclosure, because they know that you did not have the money to pay the regular mortgage. There is little reason to expect that you will be able to pay another judgment for tens of thousands of dollars. So lenders just don’t bother with deficiency judgments, and try to sell the house to make up their loss.
Hope that helps.
ForeclosureFish
