QUESTION
Can the bank take my money from a short sale on my home?
Asked on Nov 09th, 2011 on Foreclosures - Colorado
More details to this question:
About two months ago, I began the process of short selling my home. Then about three weeks ago, I was awarded money in a personal injury lawsuit. Can the bank (my lender) legally touch this money being that it is non-taxable? I would like to deposit this award money into my account, but I am afraid that the lender will see it and refuse to allow me to short sale my home. I don't know what my options are. I was also wondering if I could deposit the money into my husband’s bank account as a one-time "gift" and what the tax ramifications would be for doing that? His name is not on my home's deed or mortgage. I bought the home before we were married.
1 ANSWER
Open a new account in a different bank. Label the account as "personal injury proceeds" and deposit the money into it. Do not mix it with ANY other money. Do not give it to anyone. Either of these things may cause it to lose its exempt status. Banks have a right of set off which means that they can take money from your account if you have defaulted on a loan. Often a short sale is not in your best interests anyway. It looks as bad as a foreclosure on your credit, you have to move out instead of using the "free rent" while they are foreclosing and the IRS considers forgiven debt as income and may tax you on that amount.
Answered on Nov 14th, 2011 at 9:37 PM