It sounds like you're referring to that loan assistance program that many folks got a few years ago.
The other attorneys are correct, if you want to keep the home, it's likely able to be eliminated. To be sure, make sure that you review the paperwork with a qualified attorney.
When you file bankruptcy, you have to decide whether you will keep your house, or not. If not, then the debt will usually go away too. If you want to keep the house, you will typically have to pay for it.
Best thing to do is get a consultation and let someone look at the paperwork. I don't know why you'd have tax returns going to pay a mortgage. Happy to look at it and figure out what the best route is. It is not necessarily bankruptcy.
I'm not your attorney; my answer includes assumptions. If you want me to be your attorney, I'm easy to find.
You ask a great question. To start, I will guess you may be talking about the first-time homebuyers credit.
If so, then it worked as a credit on the income return of a first-time homebuyer who says on the tax return they are an eligible buyer who purchased a home to be a primary residence in 2008, 2009 or 2010.
The question asks for information. To get information from IRS about the first-time homebuyers credit and what you can be dealing with, then please see this link:
For the reason that it appears to be simply a tax credit governed by Internal Revenue Code then, I do not know a reason for it to be dischargeable as a debt under the bankruptcy code - unless the underlying tax liability is also dischargeable when the bankruptcy case is filed.
As you will see, the amount of the credit received becomes an amount to repay as additional tax. When and how depends on the law as it applies to the taxpayer in the year when the home was bought. Restated: 2008 is not treated the same as 2009 or 2010.
That information in the link is from the IRS and talks about what rules apply when the home is sold. And that is what is going to happen in a foreclosure sale. The foreclosure sale is what happens in the event a person decides to not keep the property in the bankruptcy.
That foreclosure sale is going to have several tax aspects, including what to do about any claimed first-time homebuyers credit in a tax return.
But of course, there are details and different facts in all cases and that controls what happens for the one person the facts apply to.
Finding a tax professional with experience in the area to provide you information may be a good investment.
Also, I agree with the information already been provided here on Avvo: the biggest question to answer first is deciding about keeping the home. The tax consequences will follow that decision.
The foregoing comments are provided for informational purposes only, and without a fee agreement and fees paid there is no attorney-client relationship being made and no legal services will be provided now or later.