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The Mortgage Forgiveness Debt Relief Act was brought up in the year 2007. After the consent of the Congress, this law was effected to offer relief to all homeowners who faced closure and still owed the government tax on forgiven mortgage debt. This act as per say generally permits taxpayers to skip paying tax on their houses that have already faced closure due to debts.

The debts that qualify for the Mortgage Forgiveness Debt Relief include the one acquired from mortgage restructure and that forgiven due to foreclosure.

Cancellation of Debt

Many would go into thoughts on what the cancellation of debt is. Whatever the cancellation of any debt meant before this act could be explained as follows. Whenever you take a loan from any commercial lender, you are supposed to pay back the funds. If the lender decides to write off your debt, then as per the law, you are required to include that amount as your taxable income. This is because you were obliged to pay the funds back, and it is naturally expected that you had sourced for the money. This is why your lender or financier is required to inform the tax authorities that they have canceled your loan and then subsequently the amount that you should be taxed. This is where the Mortgage Forgiveness Debt Relief act comes in handy to save you from tax on your principal residence. You can get the details of the mortgage forgiveness at

How long is the Act valid?

Severally, the Mortgage Debt Relief Act has had a possible expiry. Many have been worried and sought to know if an extension has been provided. Through the years, 2014 to 2016, there has been the speculations that it may never be renewed. To the joy of many, this act has gone through and is still functional in 2017.

Under the Tax extenders provisions contained in the 2016 Appropriations bill, the Mortgage Debt Relief Act got its tenure extended. Many could not see it coming, but in December 2015, the Mortgage Forgiveness and Debt Relief Act of 2007 was extended. This was not, however, glaring in the eyes of the public, and only a deep scrutiny could unravel this favor to the homeowners.

Many homeowners are still suffering due to ownership of homes that are facing or have already faced foreclosure. This act, as it is, gives such homeowners a tax exclusion which is a big relief to them. Income accruing from short sales and debt forgiveness has been lifted off their backs after being an unbearable burden. Visit site to review all the details of mortgage forgiveness.

What does the extension of this act mean?

The extension of the Mortgage Forgiveness Debt Relief Act 2007 is good news for homeowners. This Act will continue to protect homeowners, and that means debts will not be a problem. If by any chance you had given up your house for a foreclosure, the extension is still here to bail you out on tax. Other issues that it still protects you against include loan modification in 2015 or short sales. The site has more information on the issues that may affect mortgage forgiveness.

Exclusion from canceled debts

One may qualify for Exclusion for Canceled debts under any of the following;

  • Insolvency exclusion,
  • bankruptcy exclusion

Insolvency exclusion

As a debtor, you may be insolvent when your total liabilities exceed the market value of what you own as assets. The IRS does allow the exclusion when it gets to this level. The insolvency exclusion amount, on the other hand, is the canceled debt which is over and above the fair market of one’s assets.


You may receive a debt cancellation after filling a form for bankruptcy. Your debts can be exempted after going through the bankruptcy process. It is, however, vital that you exploit all other avenues before settling for a bankruptcy case. For more information regarding the other options that you may have, apart from filing for bankruptcy, and their relationship to Mortgage Forgiveness, you can visit