Financial Crisis Solutions
Our community and country faces unprecedented times in the form of economic hardship at both the business and personal level. Leveraging our 29 years of experience in resolving business and personal financial and tax problems, we are the leader in providing Financial Crisis Management to meet the needs of our business and individual clients. For businesses, this means crafting a strategy to address delinquent taxes and the problems imposed by banks that are refusing to continue to extend credit to the business. For individuals, we are designing strategies that include Loan Modifications, Debt Resolution, Bankruptcy protection and Tax Relief.
The Tools of Financial Crisis Management
There are a number of tools at play when it comes to the goal of shedding debt. In the housing sector, we have “foreclosure,” “short sales,” and “loan modifications.” In resolving credit card debt, we have “debt settlement” or “debt resolution” as I like to call it. The tools used depend on the task and the circumstances. A carpenter will sometimes purchase 2” x 6”’s and cut them to size, with drywall and sanding next, followed by a molding with paint or a cover to finish. Sometimes, however, a different mix of tasks and tools are needed for a particular job. In an office setting, walls are often pre-fabricated and metal studs are used instead of wood. Thus, a different process and mix of tools are used.
Thav Gross has been resolving financial crises and helping people for 29 years, since 1982. The key to resolving financial crisis lies in evaluating all of the Tools of Financial Crisis Management – short sales, loan modifications, bankruptcy, credit card resolution and tax relief, and selecting the optimal mix of these tools for your situation. Too many companies offer only one service and therefore claim they are the only solution. Common sense tells us that if you have all the tools – then you able to select the best ones for the job.
UNDERSTANDING THE FORECLOSURE PROCESS
I hope you’re asking – why is “foreclosure” listed as a “tool?” Foreclosure is the process by which the lender takes the property back from the homeowner or forces the property to be sold at auction to the highest bidder, thereby causing the homeowner to lose their home. So how can this be a tool? The answer is depending on your situation and the state you live in – the best strategy with regard to the house you’re under water in is sometimes not to keep the house. If the mortgage far exceeds the market value of the house and the lender will not modify the mortgage so that the principal of the mortgage loan is approximate to the house’s value, you are smarter to get rid of the house and the mortgage, and replace it with a home equal in size and personal appeal but at the market price.
VIEW YOUR HOUSE AS AN IMPORTANT ASSET – NOT AS YOUR LIFE ITSELF
Your “home” is the abode you live in. It includes the memories, the people, the energy of family and, of course, emotion. Your “house” is the physical asset, the structure which you own and which is typically encumbered by a mortgage to a lender. My point is that if you are underwater on your house – a valid goal is to move your “home” to a different site and leave the “house” that is underwater. For some, this is a difficult coin to swallow. Staying in a house that is way underwater is throwing away your chance to accumulate savings for retirement.
Additionally, there are many people who are presently living in houses with mortgages they simply can no longer afford. The practical reality is that you need to be in a home with a mortgage payment you can afford that allows some savings for the future. Though in the past, an argument could be made that savings and growth will come from the appreciation in market values, that argument holds little, if any, water in the present and foreseeable future climate. The reality is that there is no point in attempting to modify a loan if the gap is too wide.
The important point here is to learn from the past, and then going forward your goal should be to acquire a house that you can afford to pay for and maintain. The days of 10% annual increases in value are gone. It is simply not realistic to think we are going to reinvent the real estate bubble and then ride it again in the near future. America as a country does learn from its mistakes. In this case, governmental oversight and regulation designed to protect against the recurrence of the housing bubble, and the debacle we now face, means there should be no reasonable expectation of sustained super price escalation in the housing sector for many years to come.
WATCH OUT FOR TAX ISSUES
One of the most troubling tax issues that people in financial crisis face is the circumstances where the government taxes them on “forgiveness of debt.” This situation arises with short sales, deeds in lieu of foreclosure, foreclosure and debt resolution. The problem is that under several situations, where the creditor receives less than was originally loaned, the difference can give rise to income tax consequences to the individual – and this occurs at a time where the money is certainly not there to pay the tax. There are exceptions and some of them take some planning, so you need to pay attention. This is an area that we find the media and commentators do not give enough attention to. After all, how much good does it do you if we are successful at eliminating $75,000 of debt through Debt Resolution, but at the year-end you receive 1099s from the creditors and your accountant tells you that you must pay tax on the $75,000. The answer – well it’s still good, but not that good and now you have a new problem. Taxes due and no money!
There are three major exceptions that help to eliminate the requirement that you report the canceled debt as income. The exceptions do not work in every situation so you need to be sure to analyze this issue in the planning and operational plan of you Financial Crisis Management strategy:
- Bankruptcy Filing
- Qualified Principal Residence Indebtedness
- Insolvency Exclusion
Call today to schedule a free comprehensive case evaluation with one of our attorneys.