How Can Debts Not Paid Equal Taxable Income?

For some, foreclosure is the worst possible thing that could happen to them. The loss of one's home can be a devastating experience. On the other hand, there are people who view foreclosure as an easy way out. Unbelievably, some homeowners are simply walking away from their existing home to purchase a similar home across the street for a much lower price, deciding in advance to allow their original home to go into foreclosure.Whether foreclosure is by choice or by happenstance, many homeowners are not aware of the hidden tax consequences of foreclosure. When homeowners lose their property to foreclosure, the mortgage lenders will likely try to sell the property to pay off the loans. In many cases, the properties will be up side down. In other words, the debtor owes more on the mortgage than the property is worth. The banks will then have no choice but to sell the properties at a loss. The original homeowner, technically, will still owe the bank for the residual balance.

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