The so-called Great Recession of recent years that reduced the financial footing of many Americans to quicksand continues to play out for millions of individuals and families across the country, despite overall improvement across many sectors.
Take housing, for example. On the one hand, home values in many locales across the country, including in Arkansas, have clawed their way upward from steep declines after facing several years of tough challenges. On the other hand, that positive development has been far from universal, with high numbers of homeowners still having sizable mortgage-related worries.
As evidence of that and the need for ongoing debt relief in many instances, CoreLogic — a company that provides financial information to government agencies and private businesses — serves up this sobering statistic: According to second-quarter figures for 2013, nearly 15 percent of mortgaged homes are still worth less than what was paid for them. That “underwater” debt collectively amounts to more than $400 billion across the country.
And thus many people are expressing concern over the upcoming fate of the Mortgage Forgiveness Debt Relief Act, which Congress passed in 2007 to help millions of Americans confronting insuperable financial challenges. The legislation allows for the forgiveness of debt owed upon a home that exceeds its sale value.
The worry is this: If the law expires, which it is set to do this month, the IRS can claim that the forgiven debt is taxable income.
The result of that could be catastrophic for many people, given that they would suddenly be faced with a tax bill at a time when they are financially strapped to a great degree. The value of the program would be essentially illusory for many people, since taking advantage of what it offers might ultimately subject consumers to a draconian penalty down the road.
An experienced debt relief attorney can answer questions and provide strong representation to any person with concerns regarding the legislation discussed in this post or any other debt-related matter.
Source: Marketplace.org, “Tax relief may expire for underwater homeowners,” Kate Davidson, Dec. 13, 2013