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Foreclosure insight

Discussion in 'Economics and Financials' started by azfinfanmang, Oct 17, 2008.

  1. azfinfanmang

    azfinfanmang Premium Member Luxury Box

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    Okay, so I am not experienceing Foreclosure, but I have a friend whom I think is dealing with it.

    Bottomline, he got himself in waaaayyy over his head. He bought a really big house, with nothing to put down, built a pool within the first year, and even put two vehicles under his mortgage (Stupidist thing I have ever heard of, as he will be paying for those vehicles probably 15 or 20 years after he doesnt have them anymore)

    So, my question is, IF he experience Foreclosure (Not sure how he couldnt have, and he is now renting a different house) what happens? And especially, what happens to his vehicles?

    I know some of you in here really get this stuff, I dont

    Thanks in advance, az
     
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  2. rafael

    rafael Season Ticket Holder Club Member

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    The vehicles should be free and clear since most likely he either refinanced or took out a 2nd to pay for them. The house was/will be sold at auction probably at a substantially lower amount than he owes. The bank could then file a deficiency judgment for the difference against him. It depends on the bank. Some banks do, some banks don't.
     
  3. njfinfan

    njfinfan The First Lady

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    Hi Kenny! Unfortunately, Chris and I are experiencing foreclosure first hand. We just got a notice yesterday from the Essex County Sheriff that our house will be sold at a sheriff's sale on January 6, 2009. We bought the house in Newark in 2006 for $280,000 and it's being sold for just under $180,000. From what our attorney says, normally they could try and come after us for the difference, but since we also just received our bankruptcy discharge notice they can't come after it. So Rafael is 100% correct. :up:
     
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  4. azfinfanmang

    azfinfanmang Premium Member Luxury Box

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    Very very sorry to hear that Miss Mary.

    Theres no doubt that times are really tough. More and more I keep hearing about things just like this. :pity:
     
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  5. njfinfan

    njfinfan The First Lady

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    It's definitely terrible times. We're lucky we have each other and a VERY solid family support system. When I called our attorney and told him about the sheriff's sale notice I got he said we're lucky we have so much time but to get ready to leave our home. We have a dear friend who owns a house in Irvington who's going to let us live there rent free, or we would have no place to go. It's times like these when you realize who are your real friends and who are not. :no:
     
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  6. dolphindebby

    dolphindebby Season Ticket Holder Luxury Box

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    I'm so sorry Mary. I knew some of this, but I didn't know how close it was to happening.
    If you were near me, you guys would be welcome to stay with me.
    I wish there were something I could do to help. Know that my prayers are with you, Chris and the girls.
    Luv,
    Deb
     
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  7. njfinfan

    njfinfan The First Lady

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    Thanks Deb - that's heartwarming to hear. This friend is awesome and he just offered his house in Irvington out of the blue. Until I heard that, I was VERY worried about what we were going to do.

    luv
    me
     
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  8. mnfinfan

    mnfinfan Active Premium Member Luxury Box

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    Sorry to hear about that Mary, I can feel your pain, after my company went under in 2005 we were ladled with an incredible amount of debt. We are not out of the woods yet and live day to day. Another 3 years of slightly negative cash flow and we will be out of it.

    As for foreclosures even in bankruptcy they cannot come after it but the IRS can, they have the option to claim the difference ($100,000) as unrealized income for your 2008 filings. Bankruptcy does not remove you from the IRS long and clammy reach. I imagine you filed Chapter 7? Now I heard a rumour that the new bailout removed this from the IRS' purview but I have yet to confirm that. Please check with your accountant re this.

    Even after the Bankruptcy Abuse Prevention and Consumer protection Act in 2005, and depending on the state you live, if you file Ch 7, your house (up to a certain level (state or federal rules)), your car, your ERISA plans (401(k) or 403(b) etc) and IRAs are protected from creditors. Unfortunately IRAs aren't always safe from the IRS even in Ch 7. However you still need to pay for your house and car to avoid losing them, as it is very difficult near to impossible to remove that debt (home) from the creditors. This is a year you need a good accountant Mary, one who specializes in Bankruptcies and Foreclosures. Let me know if you need help finding one.
     
  9. mnfinfan

    mnfinfan Active Premium Member Luxury Box

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    They may not file for it but the IRS can and will do, I am not sure if anyone has noticed how many IRS protection commercials are out there, but that is strictly in proportion to the issue with the foreclosures going through this nation. He will more than likely be getting a 1099C from the bank.
     
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  10. mnfinfan

    mnfinfan Active Premium Member Luxury Box

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    Ok, I looked in a bit further and the debt forgiveness was signed in to relieve from income any debt forgiveness (unrealized income) for the principal residence from Jan 1 2007 through Dec 2009. The caveats, the forgiveness only applies to the principal residence, and not any refinancing to pay Credit cards or to acquire cars etc. Also you do not get this release from the unrealized income if you filed bankruptcy.

    GovTrack: H.R. 3648: Text of Legislation, Enrolled Bill
     
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  11. njfinfan

    njfinfan The First Lady

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    Thanks Paul. We did indeed file Ch 7. However, this IRS information is worrying to me. Any chance you can clarify that for me? My bankrupty attorney, whom I paid $3,000 to up front, is now of the attitude that since everything is done and the bankruptcy is discharged, he doesn't need to further advise me unless I reach back into my mother in law's not so deep pockets for more money. I don't choose to that. Lord knows she's given us enough money the past year to help with past due bills.
     
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  12. mnfinfan

    mnfinfan Active Premium Member Luxury Box

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    Mary, I have a good friend that is a CPA and does work within this field, I will give him a call this week to see what he knows.

    From what I have found is that the bankruptcy exception for the forgiveness is Ch 11, if you file Ch 7 then you are considered insolvent and shoul qualify for the forgivness. So it looks like you should be ok, but really you need to contact a Tax accountant as they will know more about this than anyone else.
     
  13. Fin Fan In Cali

    Fin Fan In Cali Dolphin fan since 1970 Luxury Box

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    Sorry to hear that Mary. Prayers, thoughts and best wishes for the future.:wink2: Sorry to hear about your friend as well Brother. This holiday season is going to be a real rough one for a lot of us.
     
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  14. dolphindebby

    dolphindebby Season Ticket Holder Luxury Box

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    Girl, please try not to worry yourself into getting sick again.
    I know it's hard, but worrying won't help or change anything. Believe me I know, I'm a worrier.
    Take care of yourself. Your health is more important than anything.
     
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  15. njfinfan

    njfinfan The First Lady

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    That's truly appreciated Paul. Thanks so much. Do tax accountants give free consultations as attorneys do? We're just tapped out and like I said I've been borrowing money from everyone we can who has it just to keep the electric and essential utilities on.
     
  16. njfinfan

    njfinfan The First Lady

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    It is indeed John. Thanks. I look at my girls' faces when they come to me and say "it's almost Christmas mom" and don't have the heart to say "you're not getting much if anything at all." I know they would understand but it's still going to be crushing to them.
     
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  17. njfinfan

    njfinfan The First Lady

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    :lol: I take after my mom - she was a huge worrier and so am I, but I'm trying to keep it all in perspective my love. Thanks kiddo.
     
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  18. Fin Fan In Cali

    Fin Fan In Cali Dolphin fan since 1970 Luxury Box

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    Mary hang in there. You and your husband love your kids very much. :wink2: Sometimes Santa works miracles to see children smile.
     
  19. njfinfan

    njfinfan The First Lady

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    Thanks John. We do. And they're very grounded young girls - they're not selfish and they understand the reality of life. I think they'll be fine - they're old enough to know now that mom and dad are Santa and that they may not get something they want. Of course, my mother in law will come through in a pinch if there's nothing underneath the tree, saint that she is, but we're hoping that will be resolved. I'm sure everything will work itself out. Always the optimist! :lol: The only thing I was really worried about was not having a roof to put over our heads in January, but that's a done deal, thanks to our friend. :up:
     
  20. azfinfanmang

    azfinfanmang Premium Member Luxury Box

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    I am a strong believer that good things happen to good people, and of course this is testemont Mary as to why somebody is helping you and your's in this way.

    As soon as you mentioned your foreclosure, I thought of 2 things (Three really), your health and your daughters.

    Sounds as things are gonna be tough for you, dont forget your internal support here. You know that this entire site is behind you and nothing but positive thoughts are coming your way.....

    Santa does work in peculiar ways my dear...very very peculiar ways.....:shifty:

    God bless you, and you know I am ALWAYS here for you.:bighug:
     
  21. azfinfanmang

    azfinfanmang Premium Member Luxury Box

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    So what your saying Paul is that he will still be on the hook for the Cars (Probably through a refinance) and probably a portion of the house (Whatever auction doesnt bring)?

    As I said, this friend was, and always has lived well beyond his means. The mentality of "IF the bank will keep lending it, I must deserve it", holds true for him. :pity:

    Also, when he told me he financed two vehicles under his mortgage made ZERO sense to me personally, as he will be paying on the principal for 30 years. BTW: It's not like he just went out and bought cars, he was easily in for 70,000 for the two vehicles.
     
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  22. njfinfan

    njfinfan The First Lady

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    That must mean the same mentality as my sister heeds "If I still have checks, I must have money in the bank." Unfortunately her Air Force husband got in ALOT of trouble for her passing bounced checks around the base.
     
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  23. njfinfan

    njfinfan The First Lady

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    You guys are truly awesome. A testament to why we love you all here so very, very much. My doctor did mention that my heart attack was brought on by the stress of everything going so I'm managing it and I'm figuring out - along with Chris - what's really worth worrying about. It's been a long road, but I know it's going to work out in the end. And I know "Santa" will come through. Thank you so so much Kenny and everyone else for being here for us.

    We love you all. :kiss:
     
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  24. dolphindebby

    dolphindebby Season Ticket Holder Luxury Box

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    Wonderful Kenny. My sentiments exactly.
    I'm here 100% Mary.
    We love you.
     
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  25. Darkoak

    Darkoak Gone for good.

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    I've been really sick the last couple of days but after reading what Mary is going through it seems like small potatoes. Sometimes you need a different reference point. I hope things start looking up soon Mary.:up:
     
  26. mnfinfan

    mnfinfan Active Premium Member Luxury Box

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    Yeah, in an indirect way he will. Basically they will take the mortgage amount, take the qualified home value and then the sale amount. If the qualified home value and the mortgage amount are the same, then the difference between the short sale and the mortgage amount is forgiven, if that is not the case then the difference between the home sale and the home value wil be forgiven and the difference between the home value and the motgage will count as income.

    examples:

    Assume Sharon’s principal residence is secured by an indebtedness of $800,000 of which $800,000 is qualified principal residence indebtedness. If the residence is sold for $700,000 and $100,000 of the debt is discharged, then the $100,000 of the amount discharged will be excluded from Sharon’s gross income under this provision.

    Assume Sharon’s principal residence is secured by an indebtedness of $1
    million, of which $800,000 is qualified principal residence indebtedness. If the residence is sold for $700,000 and $300,000 of the debt is discharged by the bank, then only $100,000 of the amount discharged may be excluded from Sharon’s gross income under this provision.

    So it all depends on where the values lie, a friend aqnd client of mine was just hit with an $84,000 IRS bill in a case similar to this.
     
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  27. azfinfanmang

    azfinfanmang Premium Member Luxury Box

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    Yeah, I was thinking that perhaps the most important fact involved is the Equity or perhaps "In-Equity" involved.

    So, if he actually makes money on the auction, he will be taxed on that amount alone.

    But once again, how do the vehicles come into play. Almost by default he will automatically have negative or "In-equity" (Not sure if that is the right or even a word at all) derived directly from the vehicles..right? That would mean that he would have to make a killing off of the auction to actually NOT have to pay additional taxes on the vehicles. right?
     
  28. Fin Fan In Cali

    Fin Fan In Cali Dolphin fan since 1970 Luxury Box

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    The way I look at it Mary, as long as we have our loved ones, and our health, that's all that really matters the most in life.:hi5:
     
  29. mnfinfan

    mnfinfan Active Premium Member Luxury Box

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    It is hard to predict exactly, it all depends on how the county/ state figure out the principal residence value. Though there is a good chance that he will get a 1099c from the bank. However so many banks are so busy there have been a lot of cases where homeowners have not received a 1099C, hopefully for his sake he doesn't, but maybe he needs this wake up call???
     
  30. vt_dolfan

    vt_dolfan Season Ticket Holder Club Member

    Mary....

    You probably have never read a response from me directed at you in the past...so I might be a distant "phins.com"...

    But this song uplifts me......reminds me were all gonna get our shot.....

    [ame]http://www.youtube.com/watch?v=UuYTpCyJYyQ[/ame]


    With the family and friends you have...always remember you are lucky to have the single most precious thing....Love.

    Im pulling for you guys.
     
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  31. njfinfan

    njfinfan The First Lady

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    Thanks vt. I read alot of your posts on the forums, but it means alot to me and my family that you guys all care so much. What a beautiful song! Thank you. I consider myself the luckiest woman in the world for the family and friends that I have and I tell my husband every day that the best day of our life was when we met our friend, Adesh, who's giving us his property rent free for as long as we need it. The way I look at it, it can't go anywhere but up from here. :up:
     
  32. vt_dolfan

    vt_dolfan Season Ticket Holder Club Member

    Could not help but put one more up......

    Hope it makes you smile.....

    [ame=http://www.youtube.com/watch?v=aVzBxPd5oa8]YouTube - Bob Marley - Three Little Birds[/ame]
     
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  33. njfinfan

    njfinfan The First Lady

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    Thanks - hadn't heard that song in a while. I love all of Marley's work. My husband was born in Jamaica. My father in law owns a cottage down there right on the beach in Port Antonio and, some time ago, I did the website for it. Every page of the site had a different Bob Marley song on it, but Three Little Birds was page 1. It's since been taken down even though he still rents out the cottage.
     
  34. mnfinfan

    mnfinfan Active Premium Member Luxury Box

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    I forgot your hubby was a fellow panhead, I knew there was a reason I liked you so much :) Days like these my dear, we have to follow the Honorable Robert Nester Marley and sing

    [ame]http://www.youtube.com/watch?v=FgqZVle2Ymo[/ame]
     
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  35. njfinfan

    njfinfan The First Lady

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    Panhead? :lol: Does that name come from the steels drums or pans? Thanks so much for all your support Paul. I just had Chris read this thread. He says thanks to everyone also.
     
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  36. mnfinfan

    mnfinfan Active Premium Member Luxury Box

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    Panhead, I don't know the etymology of it, just one of those words I have always used. It used to be my e-mail name until people kept on thinking I was a Harley Rider lol!
     
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  37. azfinfanmang

    azfinfanmang Premium Member Luxury Box

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    Funny, thats the first thing that came to mind :lol:
     
  38. njfinfan

    njfinfan The First Lady

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    Paul

    If you come online today and see this, I need for you to either PM me or email me at mary@godolphins.us, if you would. We received in the mail yesterday a "Notice of Assets and Deadline to File Proof of Claim" and I don't know what that means and I'm a little concerned. I'll further explain when you email or PM.

    Thanks so much.

    Mary
     
  39. mnfinfan

    mnfinfan Active Premium Member Luxury Box

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    Sent you a PM, but forgot to sign off, wife called and I got distracted and hit Alt+S. Let me know if you have any questions.

    Cheers

    Paul
     
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