Having a home repossessed by a lender through the legal process of foreclosure can be hard on a Colorado family. However, individuals who are forced into this difficult process may be unaware that foreclosure can leave them with unexpected financial consequences once the process has completed. This post will touch on some of the issues people may have to deal with after foreclosure but readers are reminded that this post offers no legal advice.
One consequence that a person may experience after foreclosure is an increase in their taxable income for the year the foreclosure occurred. If a home owner has $50,000 of their mortgage cancelled after a foreclosure, the Internal Revenue Service will consider that $50,000 as reportable income. They may therefore be liable for more money in taxes because of being subjected to the foreclosure process.
Another consequence of foreclosure that readers may not expect is the drop in credit score that may follow the completion of the process. A foreclosure is evidence of a loan that a person could not pay off, and as such other creditors may not view its presence on the person’s credit report as favorable. Over time, though, a person may rebuild their credit and improve their credit score.
A foreclosure is a tough thing to get through on its own, but many individuals experience other consequences to their financial health once it is over. One way to avoid these additional problems is to stop the foreclosure process in its tracks. Attorneys who support clients in foreclosure can provide them with case-specific guidance regarding the best way to overcome their financial troubles.