Friday, October 16, 2009

Dealing with Foreclosure in Oregon, Part 8

Dealing with Foreclosure in Oregon
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997

#8. How do the debts of a spouse or ex-spouse affect me?
Many people do not understand how the law treats debts of a spouse. Usually, you are not liable for the debts of your spouse or partner, although some exceptions exist. There are also many questions about debts when a divorce or a separation has occurred or is pending. Often people involved in a divorce fail to get proper legal guidance and financial damage becomes permanent. There are also increasing numbers of persons cohabiting and sharing a residence as domestic partners. While a new law in Oregon governs registered same-sex domestic partnerships (basically giving them the same rights as a heterosexual married couple), the law concerning heterosexual domestic partners is based on a body of case law in Oregon that is complex and unknown even to most attorneys. According to the decisions in these cases, unless one partner successfully sues the other partner for a judicial determination of the assets and liabilities of the couple, only the person who signed the promissory note is liable for the debt on a home, even though both people in the relationship lived in the home.

Without the help of a knowledgeable attorney to understand the legal issues involved, you could be left holding property with no equity and all the debt, while your ex-spouse has all the assets. If you are heading toward foreclosure, and are divorced or in the process of getting a divorce, you need to get proper legal advice about you debts from a lawyer that is trained in bankruptcy, real estate finance, and debt matters.

This ends my series on the 8 important questions to know when you're facing foreclosure. Next, I will post regular updates on some of the legal issues I am seeing unfold in the Portland market in real cases (confidentiality protected of course). If you have a friend in danger of losing a home to foreclosure, direct them to watch my video explaining the 8 foreclosure questions in brief. If you live in Beaverton, Hillsboro, or Portland Oregon, give me a call with your questions or comments, or post a comment to this blog.

Monday, October 12, 2009

Dealing with Foreclosure in Oregon, Part 7

Dealing with Foreclosure in Oregon
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997

#7. Should I file for bankruptcy, and when?
Some attorneys are advertising bankruptcy as a way to “stop” foreclosure. There are two kinds of bankruptcy filings available to individuals for personal debts: Chapter 7 and Chapter 13, and they both produce very different outcomes. A Chapter 7 bankruptcy will delay–but not prevent a foreclosure sale. The delay may be only 3-6 months. A Chapter 13 bankruptcy allows the debtor to follow a plan to pay his creditors over a 3- to 5-year period. Because a bankruptcy filing will stain your credit report for up to 10 years, it is often better to avoid filing for bankruptcy, depending on your total asset and debt situation. I can help you understand the different bankruptcy options, and whether bankruptcy is right for you.

Next up is part 8: How do the debts of a spouse or ex-spouse affect me?
For all 8 questions stay tuned for updates to this blog or go to my legal website. You can also watch my video explaining the 8 foreclosure questions in brief. If you live in Beaverton, Hillsboro, or Portland Oregon, give me a call with your questions or comments, or post a comment to this blog.

Wednesday, October 7, 2009

Dealing with Foreclosure in Oregon, Part 6

Dealing with Foreclosure in Oregon
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997

#6. Will I owe tax on my debts after foreclosure?
The federal tax code provides that any time you are released from a debt, you must declare that debt as income on your personal tax return for that year. This is logical when you consider that when you received the money as a loan, you did not report it as income. However a new tax law provides two exceptions to the general rule for property owners who lose property through foreclosure. The Emergency Economic Stabilization Act of 2008 extended the exclusion from gross income for the discharge of qualified principal residence indebtedness by an additional 3 years. This exclusion now applies to debt discharged after 2006 and before 2013.

The two primary exclusions which allow you to avoid reporting the debt as income on your tax return: insolvency, and qualified residence indebtedness. The law has specific requirements and certain exceptions that can be complicated to understand. After reviewing your specific situation, we can determine whether you might qualify for tax relief under the new laws or not. The answer to this question could involve tens of thousands of dollars.

Next up is part 7: Should I file for bankruptcy, and when?
For all 8 questions stay tuned for updates to this blog or go to my legal website. You can also watch my video explaining the 8 foreclosure questions in brief. If you live in Beaverton, Hillsboro, or Portland Oregon, give me a call with your questions or comments, or post a comment to this blog.

Monday, October 5, 2009

Dealing with Foreclosure in Oregon, Part 5

Dealing with Foreclosure in Oregon
(c) 2009 Benjamin D. Knaupp
Attorney at Law
Admitted in Oregon since 1997

#5. What happens to my property debts after foreclosure?
So lets say your home is worth $300,000 on the open market, and you owe $350,000. The foreclosure sale occurs, and the bank ends up with ownership of your home. Can the bank pursue collection of the other $50,000 you owe? What if you also have a second mortgage for $25,000? Will the second mortgage lender pursue collection of its debt against you? Under an Oregon law sometimes referred to as the "anti-deficiency statute," currently the first mortgage holder cannot pursue you for the unpaid debt; but a second mortgage holder is not barred from a personal lawsuit to collect its debt from you.
Homeowners with more than one mortgage typically face a foreclosure action from the lender in first position, which, if finalized, removes any junior mortgages as a lien against the property. However, this does not erase your debt to the lender, and they retain the right to sue you if you default on your promissory note. It is not common for a second position lender to pursue you for a deficiency after the foreclosure sale, unless they believe you have sufficient personal assets available to satisfy a judgment. Therefore in some circumstances, it might be advisable to continue paying the second mortgage, or negotiate a deal with the lender if you have other assets you want to protect from a lawsuit.
Another debt that is becoming more common is homeowners association dues and assessments. Increasing numbers of young, first-time homeowners in Oregon are buying town-homes and condominiums. Many of these homeowners don’t understand that when you hold title to property which is governed by a homeowners association, you are personally liable for the debts and assessments. Oregon law allows the homeowners association to file a lien against your property for unpaid dues and assessments; and also to bring a personal lawsuit against the owners if the money is not paid. Therefore, a foreclosure sale does not relieve the homeowners of personal liability for dues and assessments levied during the time they held title to the property.
Next up is part 6: Will I owe tax on my debts after foreclosure?
For all 8 questions stay tuned for updates to this blog or go to my legal website. You can also watch my video explaining the 8 foreclosure questions in brief. If you live in Beaverton, Hillsboro, or Portland Oregon, give me a call with your questions or comments, or post a comment to this blog.