Homeowners struggling with the financial challenges of rebuilding their homes in the wake of the devastation that hurricane Sandy brought to New Jersey recently received some welcome news from the U.S. Senate.
Lawmakers extended a provision of the tax law that, if allowed to expire, would have subjected many state residents who managed to prevent foreclosure to an enormous income tax debt.
The economic crisis that hit the national housing market resulted in measures by the federal government to assist families struggling with the repayment of mortgage debt on homes that had decreased substantially in value.
In many instances, the value of the home was substantially lower than the remaining mortgage balance. Government programs encouraged lenders to forgive part of the principal balance for property owners seeking a fresh financial start through the sale of the property or through a mortgage modification.
Efforts by families to eliminate debt and prevent foreclosure by taking advantage of available government programs in the wake of the economic crisis proved, however, to be a mixed blessing. Consumers freed of the burden of part of their mortgage debt found themselves confronted with a tax bill, because the tax laws treat forgiven debt as taxable income. This was the reason why Congress originally enacted the legislation exempting mortgage debt from being taxed as income.
The one-year extension of the tax relief law will help homeowners affected by storm damage and people in other parts of the state where home prices have yet to recover from the housing crisis.
For residents of Toms River and Monmouth County who need assistance with debt relief, an attorney knowledgeable in bankruptcy law might be able to help. Consumer bankruptcy could possibly prevent foreclosure, eliminate debt and help a person to achieve a fresh start.
Source: Shore News Today, “Tax break extended for mortgage debt relief,” Michael Feely, Dec. 23, 2014