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Illinois mortgage debt: What will Congress do?

The question many Illinois homeowners may be asking is what Congress is going to do about several homeowner friendly tax benefits and deductions that are set to expire on Dec. 31. As the year draws to a close, there are still millions of Americans struggling with their mortgage debt. With many uncertainties facing homeowners on Jan. 1, homeowners are looking to Congress to ease at least some of that stress.

There is no doubt that Congress has an enormous task ahead. With the country still in a recession and the desire to revamp the entire tax code, it may be hard for Congress to focus on one or two issues in a sea of problems. However, Illinois homeowners need Congress to take the time to focus on those tax issues that are important to them.

One of the biggest issues for homeowners is whether Congress will extend the Mortgage Forgiveness Debt Relief Act. Without the Act, many homeowners could be facing outrageous tax bills for 2013. The Act, which keeps homeowners from having to pay taxes on any debt forgiven or cancelled by their lender, may be the only thing that keeps some homeowners from complete financial ruin. Those who are lucky enough to complete their mortgage modifications, short sales and even foreclosures before Dec. 31, won't have that added stress.

If the Act is not renewed, there is a real possibility that thousands of homeowners may need to file for bankruptcy protection in order to avoid being penalized for being hit by the recession. Being faced with an unmanageable amount of mortgage debt is stressful enough without having to worry about what Congress will or won't do about the act. Homeowners may find that bankruptcy could give them another chance to save their home or the chance to walk away without having to worry about any tax consequences.

Source: The Washington Post, "Lame-duck Congress may tackle issues affecting buyers and sellers of homes," Kenneth R. Harney, Nov. 16, 2012

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