Legal Question in Real Estate Law in California
if a person home loan was $500k and home sold for $300k, he owe bank 200k.How he will pay if he don't have job? Does he has to pay tax on $200k ? Can the person can file bankrupcy and tax can be forgiven? what if the person is retiring at 62 would the goverment will take his retirement money ?
1 Answer from Attorneys
First, in most cases the person no longer "owes" the bank $200k. The bank cannot usually sue the former owner of the home - there are exception - but if the home was sold at a trustee sale, as most are, that's almost always the end of the story on that loan.
Second, the IRS has new rules where, at least for a while, many people don't have to pay taxes on the uncollectible ("forgiven") part of their foreclosed loans. Usually, this applies to a house that was your principal residence. People who are having foreclosures on investment property and second homes that they didn't live in usually still get 1099-C forms and have to pay tax on the unrepaid part.
You should have a personal visit with an IRS tax advisor at a nearby IRS office to see if your situation is exempt from the tax.