Bills.com: Foreclosure Can Bring Tax Problems

Homeowners threatened with foreclosure can face serious tax problems if they do not understand the consequences of foreclosure, according to Andrew Housser, co-founder and co-chief executive officer of Bills.com, San Mateo, Calif.Mr. Housser said a former homeowner may be required to pay tax on "cancellation of debt income," which is accrued when a lender agrees to waive part or all of the so-called deficiency balance. The deficiency balance is the amount remaining due after the proceeds of a foreclosure sale are subtracted from the mortgage balance plus the fees associated with the foreclosure and sale. "If you think you may face a CODI tax liability, start talking to a tax professional now," Mr. Housser advised. The company, an online personal finance portal, can be found on the Web at http://www.bills.com.