Tweet
Someone I know told me how his son (who makes about $80,000/year) just sold his So. Cal. home for $500,000+. But he originally purchased it for $700,000+, had one of those weird loans, and couldn't pay it. I was told that he was *not* required to pay the bank the difference between what he sold it for and what he owed and didn't need to file for bankruptcy. The term "soft sell" was thrown into the explanation. I don't understand what happened. Is this possible or am I just not getting the straight scoop?
-
-
His "werid loan" was probably one of those where all you pay in the interest. I'm not sure exactly how they work-my brother in law has one and tried to explain it to me. At the time, all I could think was if you are only paying interest, and you are required to do all the upkeep and maintance, then what is the advantage over renting?
Perhaps the interest was built into the purchase price?? -
Thanks for the reply. I probably didn't explain myself very well. From what I understand, he didn't own the house very long, had no equity in it, and had to sell it for way less than what he owed the bank. How/why would the bank let him off the hook and not require him to pay back the entire amount owed on the loan?Comment
-
I think I answered my own question and learned something new. I guess this was what occurred:
Short SaleComment
-
Rarely would a bank forgive the entire amount (in this case, $200,000). I would assume your acquaintance's son is still on the hook for some of the debt. Also the amount forgiven is reported as taxable income. So even if the person got $200,000 forgiven, he probably will have a nasty tax bill.Comment
-
the only way a bank would let you off with $200,000 is if you go bankrupt.Originally posted by sweeps View PostComment
-
People make all kinds of claims like that without fully explaining. He likely didn't get off scott free and probably has a lot of other money problems if that is any indication. I would say you didn't get the whole truth in this situation.Comment
Comment