Times are tough. Unemployment figures have reached a 25 year high and the equity in your house is slowly disappearing. In the past this could have meant the loss of your home and the loss of your credit. It is important to know however you have options. President Obama has given homeowners The Homeowner Affordability and Stability Plan to assist homeowners refinance their existing loan or help homeowners with lowering monthly mortgage payments. Additionally lenders have begun to show greater flexibility allowing homeowners to modify the terms of their existing loan. Of course there is always the Chapter 13 bankruptcy alternative for debtors that have a regular income whereby the bankruptcy court can reduce the interest rate and possibly lower the balance.

A new trend for homeowners is the short sale. If staying in the home is not an option, the short sale may be just what you need. A short sale is an arrangement with the lender allowing the homeowner to sell the property for less that what is owed on the mortgage. It is important to note that the homeowner DOES NOT have to be delinquent with their payments to be considered for a short sale. While a foreclosure on your credit record can affect your ability to secure a loan for 3-5 years, a short sale on your credit should only affect you for about 2 years. The amount your lender is shorted does not just go away though, you should be assured from your lender that this shortage amount will be forgiven and you will be released from the full amount of the loan. This however brings us to the homeowner’s responsibility for the forgiven debt. This could be considered taxable income, fortunately The Mortgage Forgiveness Debt Relief Act of 2007, subject to certain exceptions, allows homeowners in short sale scenarios to avoid being taxed on the forgiven debt.

If your home is at risk there are a lot of difficult decisions to make. The attorneys at Lavelle Law, Ltd. understand these difficult choices and decisions and will counsel you so that you understand your options and make the best choice for you and your family. Should you have any questions regarding your home sale or your loan documentation generally, please contact William Terpinas Jr. @ wterpinas@lavellelaw.com.