Nikolai`s Blog Site

With the terrible economy and housing sales in the tank, many people are trying to short sell their houses because they’re upside down on the mortgage. This is a bad idea unless you’re planning on filing bankruptcy. The reason being, a Chapter 7 bankruptcy discharges the underlying mortgage debt, as well as your personal obligation for yourself second mortgages, HELOCS, equity lines etc. This means that you don’t need to do a short sale to get out from underneath the crushing weight of an upside down mortgage. Usually, even though you file for bankruptcy, the lender still tries to issue a 1099C. This means that you will need to file a form 982 to avoid paying income taxes on the forgiven debt.