Last Chance for Forgiveness? The Debt Forgiveness Act and What it Means to Nevada Homeowners

Rena McDonald

The Debt Forgiveness Act.

The Mortgage Forgiveness Debt Relief Act became law on December 20, 2007 and has since been extended on 3 occasions, to the relief of millions of underwater home owners Congress agreed to extend the Act. This act offers relief to homeowners who would formerly owe taxes on forgiven debt. The last extension covers homeowners through the end of Tax Year 2016. This means that is you relinquished your home in a foreclosure, short sale of deed in lieu of lien, or had a loan modification resulting in debt forgiveness in 2015, or if one of these unfortunate events happens to you this year, you may be able to take advantage of the latest extension of the Act. 

How does the Mortgage Forgiveness Debt Relief Act work?

When a mortgage is upside down and the bank forecloses, the bank offers a principal forgiveness modification or allows the homeowner to short sell the property they will often write off or forgive the homeowner the deficiency or upside down amount. Often the bank then writes off this amount as bad debt to get a tax credit. To do that they must issue the homeowner an IRS Form 1099-C. This amount then reports as income for the homeowner who is then liable for the taxes on this amount.

For example, let’s assume your house is $100,000 upside down when it goes into a short sale. The bank will issue you a Form 1099-C for $100,000. From a legal prospective this is fantastic and the bank cannot then pursue you for the $100,000. So they can’t sue you or send you to collections for the debt you would be otherwise liable to repay.

The problem is that now your income is $100,000 higher for tax purposes. This then makes you responsible for approximately $20,000 worth of additional taxes on income you never had. This Act allows the IRS to “forgive” you those taxes so you don’t actually end up paying any additional taxes.

Not every loan is eligible.

Not every loan modification, foreclosure, or short sale that results in the issuance of the Form 1009-C qualifies for the Act. The IRS has several other requirements for qualification including the length of time you owned the home, whether or not it was your primary residence, etc.

While the extension is great news for some individuals it may not change much for most upside homeowners. Most individuals would not have paid any additional taxes regardless of whether or not the Act passed because they were insolvent for IRS purposes. 

Being insolvent means your debts are higher than your assets and they may have been forgiven the additional taxes anyway. But given the nature of the political climate no one can predict what will become of this tax exclusion that has helped so many.

Need more information?

If you have additional questions regarding the effect of the extension of the Act or any other new legislation you should contact a professional tax preparer or attorney. If you have questions please call us at (702)448-4962 for a free consultation. This information is provided for informational purposes only. It is not legal advice and does not constitute an attorney client relationship.


Do I need a Real Estate Attorney?

Rena McDonald

Do I need a lawyer when it comes to Real Estate? Isn't a real estate agent all I need?

It is a common question and the answer is that having a good attorney in the real estate shuffle is essential for protecting all parties involved in the transaction. The market in Las Vegas and the surrounding areas has been steadily heating up since the lows of 2012. A real estate deal can go to the edge of disaster multiple times in the process of buying, selling or renting, a property. A good team keeps you in a better position for a favorable outcome.

Here are a few ways our office helps our Real Estate clients:

For Agents

Often, a last minute issue can present itself, preventing a sale from closing. Working closely with an attorney can help resolve any issues that may arise so that you can close your sale. Additionally, obtaining an attorney to help you along the way protects the agent from giving legal advice and opening themselves to liability.

Our firm is experienced with handling the sales of properties that are in the foreclosure process and we have many years of experience negotiating with servicers on short sales and often obtaining deficiency waivers for the clients.  Additionally, we have represented many clients over the years in the Nevada Foreclosure Mediation Program and have been able to postpone and halt several foreclosures allowing the agent and the client the ability to complete their sale.

In addition to foreclosure prevention options our office can help assist with non-traditional sales and other unexpected issues that may arise during a sale.


In addition to real estate law our office also handles debt relief.  Often times agents will bring clients into our office who are attempting to sell their property; however, they have discovered that judgments and other liens have been attached to the property.  These liens and judgments will remain on the property and will prevent a sale from closing unless they are removed.  We will contact the IRS, and other state and city entities to negotiate the removal of tax and other government liens.  Additionally, we can assist with the negotiation and short payoff of other liens owed.  If payoff is not a feasible option for you, we can evaluate you for a bankruptcy.

Another problem sellers’ face is that sometimes they choose not to use a licensed agent to sell their home.  If you are not using a licensed agent you should contact an experienced attorney prior to selling your home.  We have seen many cases over the years wherein the seller did not require the buyer to sign an agreement or they simply used a purchase agreement they found online.  As such, these sellers have found themselves involved in litigation because the terms of the agreement or lack thereof were not clear and a dispute has arisen over the amount owed to them.  These cases are unnecessary and could have been avoided, saving the seller the time and expense of litigation. 


There have been times where buyers have purchased a home only to find out afterward that there were previous issues with the home that the seller was required to disclose but failed to do so.  This has left many new homeowners stranded with expensive problems that their insurance will not cover.  We can assist these homeowners with seeking damages against the seller for their failure to disclose these issues.

On the other hand, sometimes issues arise prior to closing that place the seller in breach of the purchase agreement; however, the seller refuses to return the earnest money deposits made by the buyers.  We can negotiate with the escrow companies holding your funds and often have them returned to you without the need for litigation.


We draft agreements, resolve disputes, and handle evictions from both sides.

When it comes to real estate transactions, you are well served and better protected with a good Real Estate Attorney on your side whether you are the buyer, seller, agent or investor. McDonald Law Group is proud to serve Nevada residents with their real estate law needs. If you are in the need of a Real Estate Attorney, please contact our office for a free consultation.

This information is provided for informational purposes only.  It is not legal advice and does not constitute an attorney-client relationship.


The Free Ride is Over? Nevada Housing Crisis Relief Options

Rena McDonald

The economy is, once again, on the incline both nationwide and in Nevada. Many Las Vegas and Henderson homeowners have been able to pull themselves out from under the debt they were facing during the previous housing crash by modifying their mortgages or making the decision to short sale their homes.  

At the time, many homeowners who were behind on their mortgage payments or were in default, were very lucky. Lenders were so overwhelmed with the sheer number of foreclosures, the buying and selling of accounts and the transferring of servicers, they simply overlooked many loans.  Lenders were also having difficulty finding the original documents such as the Deeds of Trust and Notes for several thousand loans. The lenders still attempted foreclosure on these loans without the original documents but were often halted in the process when the homeowners hired attorneys or knowledgeable real estate agents. The lawyers and agents would prevent the foreclosure due to the lender's  inability to produce the original documents required to foreclose.

While this was a big help to many homeowners, it left many people with a misunderstanding; they misinterpreted their temporary band-aid as a permanent solution.  Many homeowners thought they could never be foreclosed upon due to the lender’s inability to produce original documents.  As such, these homeowners have made no attempts to modify or short sale their mortgages and they have not made any payments since.  There are now many homeowners who have not made a mortgage payment in 5 plus years. They mistakenly believed that they would be able to live in their homes for free, indefinitely. Unfortunately, this is not the case.   

Lenders that were previously flooded with homes in crisis are now less overwhelmed and are starting to take notice of the homeowners who have not made payments in several years. More importantly, they are starting to find original documents.

The homeowners who were lucky enough to escape foreclosure are realizing that their luck was only a temporary band aid and not a permanent solution. These homeowners are facing the reality as phone calls, letters and default notices are starting to pile in.

The first step these homeowners usually attempt to take is seeking modification of their loan so that they can remain in their home.  However, due to the fact that they have not made a payment in several years, they are being told by the lenders that it is impossible to modify their loans. They are so upside down that there is now no feasible modification that would benefit the beneficiary and give the homeowner an affordable monthly payment.

If you are one of these homeowners you still have options. We have found that the homeowners who have been told that keeping their home is no longer an option have had much success with short selling their home.  

You may think that it is too late for you if you have received a Notice of Default or Breach and Election to Sell.  This is often the first notice served when you are in default and it will most likely be taped to your door and/or sent to you certified mail.  If this is the case please contact an attorney immediately as you may be eligible for the Nevada Foreclosure Mediation Program.  If you are eligible, once you elect to be in the Program, the foreclosure will immediately halt until you have had the ability to attend a mediation with a representative for the beneficiary.  Moreover, recently the rules have been changed and now require the beneficiary to present you with an amount that it would be willing to accept to short sale your home.

Additionally, many lenders are still offering cash for keys options.  Cash for keys is a program wherein the lender will pay you a lump sum for relocation expenses, in exchange for the successful short sale of your home.  Our clients have been offered anywhere from $1,000.00 to $35,000.00 by the lenders to short sale their home.  This number varies based on several factors, including the value of your home.  We can never guarantee that you will receive relocation assistance; however, many of our clients have received this benefit.  

Short Sales are still a process that requires several rounds of review by the lenders wherein you will most likely be required to turn over your financial documents and provide proof of your hardship; however, we have several years of experience performing short sales together as a real estate agent and attorney team and have found success for many of our clients with minimal distress on the part of the client.

If you think short sale might be the right option for you, please feel free to contact McDonald Law Group, LLC at 702-448-4962 and/or Scott Meservey of Realty Executives of Nevada at 702-496-4710 to schedule a free consultation. This information is provided for informational purposes only. It is not legal advice and does not constitute an attorney client or agent client relationship.



Child Custody & Support;  When Circumstances Require Changes

Rena McDonald

Going through a divorce and/or custody battle can be one of the most difficult times in a person’s life.  Once the process is finished and the orders have been filed with the Court, the majority of people who have had to endure the process of establishing child custody and support may never have to revisit this difficult process again.  However, if you and the other parent have an agreement in place with regard to the custody, support or visitation of children from your relationship or marriage then there may come a time when that court ordered arrangement may need to be changed.


There are many reasons that may lead you or the other parent to seek modifications to child custody.  In seeking a modification for custody a parent can voluntarily relinquish their rights to the children, you or the other parent could face unexpected health or financial issues which could impact you or the other parent’s ability to care for the children, or if the other parent has shown behavior or actions which you feel could endanger your children or your relationship with them then you may have grounds for a modification.  When seeking a modification for child custody it is important to remember that the court will not modify custody based on your interests but will only modify the custody of a child based on the best interest of the child.


Of course, anytime that the custody arrangement has been modified, the support paid or received should also be revisited.  However, what many parents do not know is that in the State of Nevada, even if you have not modified custody, you have the right to try and modify child support every three years (since the date that last the order was filed) or when you or the other parent have a significant change in your income, normally over 20%.  This change in income does not apply to a temporary situation but to a permanent or semi-permanent situation. 


Dealing with legal issues can be stressful, never more so than when it involves your own children and as a parent it is important to know your rights and the rights of your children.  Our firm has the knowledge and experience to guide you through this difficult time and help you. 


If you believe that you may need a modification to your child support or custody arrangement, please contact our office to discuss your case with one of our attorneys. Please call us at (702) 448-4962 to set up a free consultation.  This information is provided for informational purposes only.  It is not legal advice and does not constitute an attorney-client relationship.