Debt Forgiveness Act of 2007 Expiring in 2012 – What You Need to Know

At the height of all the market insanity in 2007, Congress passed a law to help homeowners who were at risk of losing their homes. Essentially, the law stated that if a homeowner (and this only applies to their primary residence) was unable to meet their mortgage obligation and had their debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure may qualifies for the relief and they may NOT be obligated to pay taxes when the lender filed a “Cancellation of Debt”.

If the homeowner has a mortgage and the lender forgives or cancels the debt, the forgiven amount can be subject to taxes. The lender is required to report the “Cancellation of Debt” to the IRS. The borrowed money, since it is forgiven and no longer required to be repaid, is considered income by the IRS and is taxable as such. The Debt Forgiveness Act offers just that – forgiveness of the potentially taxable amount.

When the act expires? Ouch. Possible BIG ouch. The law is set to expire in December of 2012 and being indebted to the IRS is no laughing matter. Although there is already “talk” of the Act being extended past 2012, it’s important to stay informed! What does that mean for your clients facing foreclosure wondering about the tax liability?

It means NOW is the time to act. Many lenders take a long time to foreclose. The nationwide average is about 16 months after ‘no payment’ on the part of the borrower and in some regions; it’s even longer than that. If a homeowner is having extreme difficulties making their mortgage payment, they should give the short sale option serious consideration and then start the balling rolling immediately.

Why? Think about this. Even if someone stopped making payments today, they probably wouldn’t be foreclosed on before the end of 2012. If the Mortgage Debt Forgiveness Relief Act is NOT extended, homeowners who are foreclosed on after 2012 could be subject to income taxation at their regular tax bracket on the deficiency amount – this can sometimes run into hundreds of thousands of dollars!

Just to make this crystal clear – here’s the simple math: The homeowner borrows $350,000 and then defaults on the loan and the original lender ends up recouping only $250,000. The remaining debt could be considered income for the borrower. There is a ‘cancellation of debt of $100,000, which is the income that could be taxable – and due immediately. Like we said: Ouch.


The best thing to do is to be informed! Discuss this Act your tax professional and contact us for more information.

You can visit the IRS website about the “Mortgage Forgiveness Debt Relief Act and Debt Cancellation” for more information:


If you or your clients are having difficulty making your mortgage payment and attempting to avoid foreclosure, we recommend looking into a short sale.  Point your clients in the direction that will do them the most good – keep their credit intact as much as possible and put them on the path likely to lead to homeownership once again – the Short Sale!

Remember, here at Short Sale Experts, the short sale is what we do – all day, every day. We know our way around the process and working with us is intentionally designed to make your job – and your life – easier. AND, get results for your clients. Talk to us about how we can make your life easier – no obligation, no stress and expert assistance. We’re here for YOU.


Leave a Reply

Caminin önünde ve iki yanında geniş cami halısı dış avlusu olup duvarlarla çevrilidir. Zemin kaplama malzemesi kategorisine giren cami halıları, cami ye girerken ilk göze çarpan bir dekordur. Dekoru farklı yapan ise, halıdaki desen, ipliğin kalitesi ve motifteki göz alıcı tasarımlardır. Betonarme zemini kaplamasının dışında cemaatin rahat bir şekilde ibadet etmesini sağlayan cami halıları kaliteli malzemelerden ipliklerden üretilir. Halının dokusundaki sıklıkla orantılı olan kalite, dokunulduğunda kendini belli eder. Bu avulya 3 ü cephede olmak üzere, sekiz kapıdan girilir. Avlusu, 26 adet granit mermer ve porfir sütuna oturtulmuş, 30 kubbeyle çevrili geniş alandır. Mermer döşemeli bu geniş sahanın ortasında 6 mermer sütunlu şadırvan, sahanın azametini gösterir. Şadırvanın kemerleri, kabartma olarak Rumi geçmelerle ve köşebentleri, kabartma, lale ve karanfil motifleriyle bezelidir. İç avluya, biri cepheden ikisi yandan olmak üzere herbiri merdivenli 3 kapıdan girilmektedir.

Latest Posts


925 B Street Suite 102
San Diego CA, 92101
Phone: (888) 746-7820
Fax: (888) 597-2040

Short Sale Expert

Encore Real Estate Group
CA DRE Lic. #01883210

Broker: Troy Anthony Huerta
Agent: Leon Cook
CA DRE Lic: #01028204
CA DRE Lic: #01866021

925 B Street Suite 102
San Diego, CA 92101

Phone: 1-888-746-7820