Chris Asked: I took advantage of the $7,500 First Time Homebuyer Tax Credit in 2008. If I rent the house, what ha

Here is the deal:

I took advantage of the $7,500 First Time Homebuyer Tax Credit in 2008.

This was not the $8k Credit that came in 2009. The 2009 credit is not a loan.

My Tax Credit is a $7,500 loan, set to be repaid in $500 installments over a 15 year period.

So here is where things spiral into a possible disaster for me:

I made the first $500 payment while filing my 2010 Taxes in February. I owe $7,000. The rules of this credit state that the IRS can bill me for the ENTIRE AMOUNT DUE if I change my address. (In other words, If the property I received the credit on is no longer owner occupied or sold)

Well, I purchased my home three years ago. I owe 145k. It is worth 115k. I can rent it for a straight across break even amount, which would cover the Mortgage, Taxes, Insurance, and Property Management fees. That is where my luck ends.

I live in the Central Valley of California. Unemployment is straddling 20 percent, and work is scarce. My construction job involves me driving up to 200 miles per day for work (When there is work) , and the car repair costs are crushing me. I have the option to move asap, or file for bankruptcy in the next few months. Right now, my credit is flawless, other than the mounting debt I am incurring every day I stay here…and I will default If I do not leave. Its just a matter of time…

So my question is (In a nutshell), is the IRS going to demand $7,000 from me when I move, or do they have provisions for a situation like this? I cannot be the only one facing this problem!