Buying a new home can be exciting and feel like a dream come true, especially if you’re a first time homeowner.  Even though a new home is cause for celebration, don’t let the excitement blind you to the fine print.  Anyone who has ever purchased a new home will tell you that the closing process can shuffle through quickly.  Many times it will be scheduled at a title company or similar type of office.  And then the signing party begins.  Paper after paper will be pushed in front of you.  Every signature seems simple enough because the end goal is to get the house.  Even though you may not be thinking of it at the time, every signature you tender comes with a commitment.  Painfully, many homeowners will be feeling the pinch with their 2010 taxes.

Last year, many people purchased new homes and took advantage of different types of credits.  If you purchased your new home between April 2008 and July of 2009, you probably received a $7500 tax credit under the Housing and Economic Recovery Act of 2008.  If you purchased your home after January 2009, then you may have qualified for the $8000 first time homeowner tax credit.  Even though there is only a $500 difference in the credit of each program, the year end consequence is significantly different.  Under the older program, if you sought and received the $7500 tax credit, you will be required to repay the credit through your annual tax obligations because it was only intended to be an interest free loan.  If you received the $8000 credit, you will not be required to pay it back as long as you continue using the residence as your principal home for 36 months.

If you are thinking about filing for bankruptcy, this is an incredibly important distinction.  For your bankruptcy attorney to assist you in planning and preparing your bankruptcy petition, they will need to have accurate information regarding every debt obligation, including tax obligations.  You also want to make sure that you have accurately filed your income tax returns before filing for bankruptcy.  Tax obligations are handled differently from credit card obligations during bankruptcy.  They can be addressed and resolved through the bankruptcy process.  However, provoking an audit or failing to pay your taxes will only complicate your bankruptcy filing.  Even if you are not sure which “credit” you received, advise your bankruptcy attorney so they can advise you appropriately.