When financial circumstances get rough and a Texas homeowner is no longer able to pay his or her mortgage payments, the lender of the mortgage usually chooses to begin the foreclosure process on the property. This process will result in the consequence of the homeowner losing his or her home, as the bank will repossess it. There are other foreclosure consequences as well that a homeowner may want to keep in mind, such as:
Having the foreclosure on your credit score: Aside from losing your home, one of the worst consequences of foreclosure relates to the way that the foreclosure could negatively impact the homeowner’s credit score. This negative impact will involve a note that appears on your credit history and future lenders will be able to see this “red flag” as well as your lowered credit rating. In a lot of cases, a lender may choose to not issue a loan to you on the basis of having a past foreclosure. Fortunately, this “red flag” will disappear after a seven-year period.
The tax consequences of a home foreclosure: It’s a little known fact that a home foreclosure will result in higher taxes. When a debt gets canceled via the foreclosure process, the bank will view this canceled debt to be income. If you owe $100,000 on your home mortgage, and the bank sells your property for $50,000 and discharges the remaining $50,000 of your debt, the IRS will count that $50,000 as income for the year. If you’ve filed for bankruptcy and have other specific circumstances, you might be able to waive this additional “income.”
Facing the threat of foreclosure can be scary. If you need to defend against a bank’s foreclosure on your real estate property, learn more about Texas debt, bankruptcy and mortgage law now.