If your problem is financial insecurity in property, sometimes the best option is to “just walk away.” If you overextended yourself and can no longer afford the real estate or personal property you own, walking away from it may be the best option for you. Given the rise in bankruptcy filings across the country, and specifically in Indiana, this issue becomes more pressing each year. It is important in these situations that you talk to an experienced bankruptcy attorney to get advice and learn more about your options. Federal law allows one the opportunity to walk away from property in some situations. If the property you are worried about is real property, visit this government site to learn more about mortgage foreclosures.
Why is Walking Away Sometimes Better than Selling the Property?
While it is often a viable option to simply sell the property, in many cases it will leave you with a deficiency balance. A deficiency balance is the money still owed after you no longer own the property. For example, if you owned a boat and continued to owe $50 on the boat, but sold it for $25 dollars, you would still have a deficiency balance of $25. By walking away from the boat in bankruptcy, you would avoid the deficiency balance and maintain no further interest in the boat.
When Can You Walk Away from Property?
If you are filing for Chapter 7 bankruptcy, walking away from property is likely not an option, and there is little value in doing so anyway. However, in an Indiana Chapter 13 bankruptcy, walking away from property can be a valuable move. If you choose to walk away from property in a Chapter 13 bankruptcy claim, the creditor will likely not be permitted to continue to collect from you under your monthly plan. The issues surrounding such a strategy, walking away from property, can be very complicated and convoluted. As such, consulting a bankruptcy attorney is a crucial step in the process.
What are the Tax Implications?
Another important reason to consult an attorney during the bankruptcy and/or walking away process is to ensure that you understand all of the tax implications of your decisions. Generally speaking, if you walk away from property, or if the creditor excuses the debt before bankruptcy, you may owe taxes on the amount forgiven. After filing for bankruptcy, the tax implications of forgiven debts is altered greatly. The issues regarding tax implications of debt forgiveness are highly complex and are best understood by an experienced and knowledgeable attorney.
What Should You Do?
The first step is to consult an attorney. When it comes to bankruptcy and tax liability, an attorney is in the best position to give you advice specific to your case understanding your financial situation. Contact our office to learn more, or visit our website for more information.