First Time Home Buyer Credit and Bankruptcy

[jjcrawford]

What is the name of your state (only U.S. law)? Arizona


I'm going to be filing bankruptcy in the next few months but I have one question no one can seem to answer. I purchased my home in January of 2010 when the first time home buyer credit was 10% not to exceed $8,000. I received the credit but now I'm looking at bankruptcy and trying to figure out if I'm going to include my house. If I include it in the bankruptcy, will I owe the entire amount back or will it be pro rated? I know that it needs to be my primary residence for 3 years or you have to repay the full amount back, and foreclosure has the same consequences. I couldn't find information on short sale or bankruptcy when it comes to the credit. Any help is greatly appreciated. Thanks.

 

[FlyingRon]

If the house no longer is your principal residence within 36 months of purchase under the credit, you owe the money back. So included in the bankruptcy or not, if you continue to reside there, you aren't subject to repayment if you stick it out until next January. If the house gets foreclosed upon (or you move out for whatever reason) before then, you are subject to the repayment.

The good news however, is it is capped at the gain you made on the sale. It's most likely the case that the foreclosure will only net the amount of the mortgage (unless you have a whole lot of equity due) and hence you'll probably not owe much if anything.

 

[jjcrawford]

If the house no longer is your principal residence within 36 months of purchase under the credit, you owe the money back. So included in the bankruptcy or not, if you continue to reside there, you aren't subject to repayment if you stick it out until next January. If the house gets foreclosed upon (or you move out for whatever reason) before then, you are subject to the repayment.

The good news however, is it is capped at the gain you made on the sale. It's most likely the case that the foreclosure will only net the amount of the mortgage (unless you have a whole lot of equity due) and hence you'll probably not owe much if anything.

Oh ok. So most likely any gain will just go to the government (whether it's $8k or less) and I do not get to pocket any/most of it? Which is ok in my book. I do not have much equity in the house at all to be honest.