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QUESTION:  If I file bankruptcy & include my home am I covered from tax implications with the Mortgage Debt Relief Act (if extended into 2013) on a charged off Account with my 2nd mortgage ?  I was given an 80/20 loan at the time of purchase!

ANSWER:   If you mean by "including" your home in a bankruptcy, that you will surrender it to the bank, you will not suffer any tax consequences because the Internal Revenue Code at 26 U.S.C. § 108 (a)(1)(A) specifically excludes from income debt cancelled through a Title 11 (Bankruptcy) case.   Outside of bankruptcy, the Mortgage Debt Relief Act would protect you on any amounts forgiven on the first mortgage, but not the second.   If it is your goal to save the home, you might be able to strip off the second mortgage in a Chapter 13 bankruptcy, and I would encourage you to explore that potentiality.


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