Foreclosure comes with tax consequences that bankruptcy can eliminate

1204152675Jw6Hvj.jpgDon’t allow a bank to foreclose on your home without first talking to a bankruptcy attorney. Foreclosure can come with huge tax consequences that could be eliminated in bankruptcy. When a mortgage is written off you can potentially get a deficiency judgment but there is also a likelihood of receiving a 1099 at the end of the year. If you are allowing a home to go into foreclosure you are probably not in a position to pay income taxes on the amount that the bank did not collect on your mortgage due to the foreclosure. The amount that the bank lost is treated as income to you and paid at your normal tax rate. This can easily double or triple your tax liability in the following year. If you surrender your house in bankruptcy there will be no tax liability.