trustee will often have to sell it for less than its initial value—and less than the amount you owe — simply to get rid of it and keep from taking a loss. (This is known as an underbid. ) If the lender sells the property for less than it was worth when you bought it, it will look as though a large part of your mortgage debt was forgiven by the lender. In other words, the lender loaned you money that you don’t have to pay back now. To the IRS, that looks like income! It looks as though you’ve benefited from a sizeable windfall, and the federal government may demand its share of taxes for income and capital gains! Some exceptions apply. For example, if you’ve recently gone through bankruptcy or are otherwise dealing with insolvency, you might not be subject to this kind of taxation. This would be an excellent time to consult your accountant or tax attorney to find out whether you’re required to file special paperwork with the IRS and to determine what the impact might be on ; ; It’s usually not a crisis to be late on a mortgage payment. Repeatedly missing payments can trigger the bank to issue a “Notice of Default” and begin foreclosure proceedings. ; ; Foreclosure usually takes some time. You probably won’t need to move out immediately, but you should immediately start working on your foreclosure strategy. ; ; Foreclosure can subject individuals to a range of emotions. Controlling those emotions and making good decisions can set the stage for future success and happiness. your individual situation. POINTS TO REMEMBER:
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