If i file for bankruptcy in south florida and i have a vacant investment property that is under water, do I have to be currIf i file for bankruptcy in south florida and i have a vacant investment property that is under water, do I have to be current on the loan to avoid getting a 1099. How can I avoid paying taxes on the deficiency when the bank finally forecloses and auctions the house for less then what I owe? I have another property which is my primary residence (homesteaded).
1 Answer from Attorneys
No, you aren't required to and receive no benefit by being current on the debt. If
handled properly, you will not have a deficiency judgment related to the foreclosure,
or a 1099 related to forgiveness of debt which increases your taxable income. A
bankruptcy chapter 7 will discharge any debt related to the mortgage. Even if you
do not file bankruptcy, there should be no deficiency judgment resulting from the
foreclosure, which is the case in most south Florida bankruptcies which are
handled properly.Your homestead will be exempt from creditors in bankruptcy if
desired.
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