Boston Bankruptcy Attorney

The Mortgage Forgiveness Debt Relief Act of 2007

The Mortgage Forgiveness Debt Relief Act of 2007 was signed into law by President Bush in December of 2007. It was passed by Congress in an effort to provide tax relief to individuals whose homes had faced foreclosure but had their mortgage debt relieved. When the Act initially became law in 2007, it was intended to affect and to apply to debts that were discharged during 2007 and lasting through 2009.

However, when the Emergency Economic Stabilization Act of 2008 was passed, this tax benefit was extended an additional three years. This means that debts discharged through the 2012 calendar year are eligible under the Mortgage Forgiveness Debt Relief Act of 2007.

The law was necessary to provide relief to homeowners who had faced foreclosure and had their debts relieved because under the normal tax laws of the United States, when a lender forgives all or a portion of a debt, the forgiven amount is taxed as though it was income for the borrower. Under the act, though, the "income" from a forgiven debt is not taxed.

The Mortgage Forgiveness Act allows a borrower/debtor and his or her lender to work together to create a solution to the problem without going through foreclosure. The protection, and benefit, of the act is limited to a person's primary residence. This means that if a person has a rental property, he or she cannot utilize the Mortgage Forgiveness Act to remove some of his or her tax burden. As in any case involving taxes, consulting a tax adviser is advisable.

Contact a Boston Bankruptcy Attorney

If you are concerned that you are going to be facing foreclosure proceedings in the very near future and would like to learn about options to stop the proceedings, contact the Boston bankruptcy lawyers of Joshua Spirn & Associates at 1-800-975-5346.