After a divorce I filed for chapter 7 bankruptcy in 2011 to get rid of 2 mortgages (one for a piece of vacancy land and the other for the home which my ex husband stayed in). I also quit claimed the deeds over to him. Now 2 years later the bank is moving forward to foreclose on the property. I understand my name is still on the note and it will count against my credit again if it goes into foreclosure. Ex husband is trying to do a deed in lieu of foreclosure but requires my signature since I am on the note. I am hesitant to do so because it was my understanding that a deed in lieu carries with it the problem of the amount being forgive counting as income and you have to pay income tax on it. Is this true? I read about a law in 2007 that if you qualify will not require you to treat it as income but I don't seem to qualify as one mortgage was for a vacant lot and the other is for a home that I have not lived in for over 2 years. Would my bankruptcy cover me not to owe anything since the debt has already been discharged or would it out me back on the hook to have to pay again. I'm basically trying to make the decision to allow foreclosure and hurt my credit further but not suffer financially or do the deed in lieu, save my credit and possibly have to pay a lot of money for the amount forgiven. Thanks.
1 Answer from Attorneys
The debt has been discharged. You do not owe it anymore. Nothing that the creditor can do will make you owe the debt. It is gone. But they do have an interest in the land, they have a mortgage on it and can go after and get the land into their name. They cannot go after you personally, they can only go after the property, and that is called an "in rem" action. Your credit has already been damaged, the bankruptcy gave you a clean slate, a fresh start.
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