Recourse Law in Florida

• In Florida, when a borrower borrows money, he is obligated to pay the full amount plus promised interest, regardless of what happens to the underlying property. Florida is not a non-recourse state.
  
  

Tax Treatment of Loan Forgiveness

• When a borrower defaults or forecloses in Florida, the lender can pursue a judgement or forgive part or all of the unpaid balance. If all or part of the loan is forgiven, the borrower may be liable for income tax on the forgiven amount.
  
  

Exceptions to Taxation of Forgiven Loans

• The loan is treated as a gift and not a forgiven loan if it is from a family member, if the loans are forgiven or cancelled in bankruptcy or if you are insolvent (meaning total debts are greater than the fair market value of total assets). There also certain exceptions that apply only to farmers. Contact a tax professional for more information if this applies to you.