Comments on: 1099C: Is Foreclosure Or Short Sale Better? http://housingdoom.com/2008/06/27/1099c-is-jingle-mail-or-short-sale-better/ Thu, 24 May 2012 01:57:19 +0000 hourly 1 http://wordpress.org/?v= By: flacorps http://housingdoom.com/2008/06/27/1099c-is-jingle-mail-or-short-sale-better/#comment-12738 flacorps Tue, 02 Sep 2008 17:30:18 +0000 http://housingdoom.com/?p=1450#comment-12738 If the 1099-C can't be negotiated down or away, the debtor whose forgiveness is not exempt (not purchase money mortgage on primary residence) may want to consider doing a deal that leaves him or her on the hook for the deficiency, or even allowing foreclosure. The 1099-C form does not have to be issued until collections efforts have not been made for 36 months, and in some states (Connecticut being one), it provides a defense in court if sued for the underlying debt (which is forgiven with a King's-X behind the back according to the IRS, but not according to sensible state courts). In any case, as the deficiency balance is sold and resold to various Junk Debt Buyers, a 1099-C may never be issued (a 2006 case, DBA v. Snow requires issuance, but compliance among smaller JDBs is likely to be spotty--an successive buyers are usually smaller and smaller). There are too many variables to make any strategy foolproof, but cans kicked down the road often enough do tend to just rust out... If the 1099-C can’t be negotiated down or away, the debtor whose forgiveness is not exempt (not purchase money mortgage on primary residence) may want to consider doing a deal that leaves him or her on the hook for the deficiency, or even allowing foreclosure.

The 1099-C form does not have to be issued until collections efforts have not been made for 36 months, and in some states (Connecticut being one), it provides a defense in court if sued for the underlying debt (which is forgiven with a King’s-X behind the back according to the IRS, but not according to sensible state courts).

In any case, as the deficiency balance is sold and resold to various Junk Debt Buyers, a 1099-C may never be issued (a 2006 case, DBA v. Snow requires issuance, but compliance among smaller JDBs is likely to be spotty–an successive buyers are usually smaller and smaller).

There are too many variables to make any strategy foolproof, but cans kicked down the road often enough do tend to just rust out…

]]> By: awgee http://housingdoom.com/2008/06/27/1099c-is-jingle-mail-or-short-sale-better/#comment-12737 awgee Mon, 30 Jun 2008 15:47:14 +0000 http://housingdoom.com/?p=1450#comment-12737 Income tax is assessed on the amount of debt forgiven, not on the amount recorded on a 1099 C or other 1099. And you may be assessed penalties and interest on amounts owed and not paid. Incurrence of penalties and interest is based on amount owed, not on whether the taxpayer received a 1099 C. In other words, you owe the tax whether you are informed or not. Income tax is assessed on the amount of debt forgiven, not on the amount recorded on a 1099 C or other 1099. And you may be assessed penalties and interest on amounts owed and not paid. Incurrence of penalties and interest is based on amount owed, not on whether the taxpayer received a 1099 C. In other words, you owe the tax whether you are informed or not.

]]> By: mortgagemess http://housingdoom.com/2008/06/27/1099c-is-jingle-mail-or-short-sale-better/#comment-12736 mortgagemess Sat, 28 Jun 2008 14:48:59 +0000 http://housingdoom.com/?p=1450#comment-12736 Sorry Seans80..but just as the property will be recorded by the county as a "Deed in Lieu of Foreclosure" it will also be recorded on your credit as such..it will NOT show as a paid in full. It will still be damaging to your credit. Also, tax ramifications have to be PART of the deed and that has to be accepted by the lender. It is not a given. Tobby you may not have encountered a 1099 yet on the foreclosure, unless the property is an investment property. If it is the primary residence there won't be a 1099. Dthiessen...getting a 1099 can mean HUGE tax liablities..imagine you home equity lined your home in Florida to a $1 million dollar note..now the bank takes back the property and sells it for $600K...you now have a tax liability on $400K of income.. Also Tobby..suing the lender takes money..chances are if you facing foreclosure..money is a issue.. Sorry Seans80..but just as the property will be recorded by the county as a “Deed in Lieu of Foreclosure” it will also be recorded on your credit as such..it will NOT show as a paid in full. It will still be damaging to your credit.
Also, tax ramifications have to be PART of the deed and that has to be accepted by the lender. It is not a given.

Tobby you may not have encountered a 1099 yet on the foreclosure, unless the property is an investment property. If it is the primary residence there won’t be a 1099.

Dthiessen…getting a 1099 can mean HUGE tax liablities..imagine you home equity lined your home in Florida to a $1 million dollar note..now the bank takes back the property and sells it for $600K…you now have a tax liability on $400K of income..

Also Tobby..suing the lender takes money..chances are if you facing foreclosure..money is a issue..

]]> By: twist http://housingdoom.com/2008/06/27/1099c-is-jingle-mail-or-short-sale-better/#comment-12735 twist Sat, 28 Jun 2008 12:33:19 +0000 http://housingdoom.com/?p=1450#comment-12735 Temeku- We have had to switch to a newer version of WordPress, and we are still ironing out the bugs. I'll run your problem by our sys admin. Temeku-

We have had to switch to a newer version of WordPress, and we are still ironing out the bugs. I’ll run your problem by our sys admin.

]]> By: TemekuT http://housingdoom.com/2008/06/27/1099c-is-jingle-mail-or-short-sale-better/#comment-12734 TemekuT Sat, 28 Jun 2008 06:03:12 +0000 http://housingdoom.com/?p=1450#comment-12734 John , when I am in the postings I don't have either side links, as it should be. But,when I am on the home page I don't have the left side blogroll, but I do have the right side articles. I am using Firefox as my browser. I'm wondering if something in Firefox could be suppressing the blogroll links? How do I produce (the anti-spam word) the left side blogroll? Thanks for any suggestions you or others can supply. I'm not so adept at configuring my computer. John , when I am in the postings I don’t have either side links, as it should be. But,when I am on the home page I don’t have the left side blogroll, but I do have the right side articles. I am using Firefox as my browser. I’m wondering if something in Firefox could be suppressing the blogroll links?

How do I produce (the anti-spam word) the left side blogroll? Thanks for any suggestions you or others can supply. I’m not so adept at configuring my computer.

]]> By: henrysmedford http://housingdoom.com/2008/06/27/1099c-is-jingle-mail-or-short-sale-better/#comment-12733 henrysmedford Sat, 28 Jun 2008 02:49:44 +0000 http://housingdoom.com/?p=1450#comment-12733 The Mortgage Forgiveness Debt Relief act is only good through 2009. So will a lot of people give there house back in 09? Are if they give it back in 2010 the tax man cometh. That why I think house prices will keep going down. The Mortgage Forgiveness Debt Relief act is only good through 2009. So will a lot of people give there house back in 09? Are if they give it back in 2010 the tax man cometh. That why I think house prices will keep going down.

]]> By: John M. http://housingdoom.com/2008/06/27/1099c-is-jingle-mail-or-short-sale-better/#comment-12732 John M. Sat, 28 Jun 2008 02:28:43 +0000 http://housingdoom.com/?p=1450#comment-12732 TemekuT - You won't see the sidebar while you're reading an article, but if you go to Doom's home page (by clicking on "Housing Doom" at the very top of the page) the sidebar will appear. TemekuT -

You won’t see the sidebar while you’re reading an article, but if you go to Doom’s home page (by clicking on “Housing Doom” at the very top of the page) the sidebar will appear.

]]> By: TemekuT http://housingdoom.com/2008/06/27/1099c-is-jingle-mail-or-short-sale-better/#comment-12731 TemekuT Sat, 28 Jun 2008 01:51:51 +0000 http://housingdoom.com/?p=1450#comment-12731 This is OT, but I don't see the blogroll on the left sidebar anymore. Perhaps you are still working on the software upgrade? This is OT, but I don’t see the blogroll on the left sidebar anymore. Perhaps you are still working on the software upgrade?

]]> By: dthiessen http://housingdoom.com/2008/06/27/1099c-is-jingle-mail-or-short-sale-better/#comment-12730 dthiessen Fri, 27 Jun 2008 19:08:28 +0000 http://housingdoom.com/?p=1450#comment-12730 The law passed last december allows for income earned as a result of reduction of debt on owner occupied residences, for acquisition debt only. No cash out type loans. If you are issued a 1099 you don't have to report it to the IRS . There are dollar limits and exclusions to the rule. But if you can get one of those 1099's instead of a foreclosure it is likely to be way better for you. The law passed last december allows for income earned as a result of reduction of debt on owner occupied residences, for acquisition debt only. No cash out type loans. If you are issued a 1099 you don’t have to report it to the IRS . There are dollar limits and exclusions to the rule. But if you can get one of those 1099′s instead of a foreclosure it is likely to be way better for you.

]]> By: Tobby http://housingdoom.com/2008/06/27/1099c-is-jingle-mail-or-short-sale-better/#comment-12729 Tobby Fri, 27 Jun 2008 17:49:00 +0000 http://housingdoom.com/?p=1450#comment-12729 I have never seen a 1099 on a foreclosure. The HELOC issue is another can of worms. It depends if the HELOC was used in the original purchase. If so, then it is non-recourse up to the amount originally used. Any additional credit taken out on that HELOC is treated like credit card debt. Same with new HELOCS. With respect to short-sale non-owner occupied housing, I have seen the 1099 negotiated out of the deal in commercial properties in years past. It usually involves counter suing the lender for some transgression (real or not). Dropping the 1099 then becomes part of the liquidated damages in a settlement and is not taxable. I have never seen a 1099 on a foreclosure. The HELOC issue is another can of worms. It depends if the HELOC was used in the original purchase. If so, then it is non-recourse up to the amount originally used. Any additional credit taken out on that HELOC is treated like credit card debt. Same with new HELOCS.

With respect to short-sale non-owner occupied housing, I have seen the 1099 negotiated out of the deal in commercial properties in years past. It usually involves counter suing the lender for some transgression (real or not). Dropping the 1099 then becomes part of the liquidated damages in a settlement and is not taxable.

]]> By: John M. http://housingdoom.com/2008/06/27/1099c-is-jingle-mail-or-short-sale-better/#comment-12728 John M. Fri, 27 Jun 2008 16:39:09 +0000 http://housingdoom.com/?p=1450#comment-12728 twist - I just flunked the Turing Test :( Anyway, seans80, at least <em>you</em> look human :) twist -

I just flunked the Turing Test :(

Anyway, seans80, at least you look human :)

]]> By: seans80 http://housingdoom.com/2008/06/27/1099c-is-jingle-mail-or-short-sale-better/#comment-12727 seans80 Fri, 27 Jun 2008 16:34:43 +0000 http://housingdoom.com/?p=1450#comment-12727 The best thing to do in my opinion is to sign a deed in lieu of foreclosure, "if" the bank offers you one. Normally they only offer it to you if there is equity in the property (which is not really the case in our current market). I do not believe there are ANY tax ramifications and the lender is happy to do it as it keeps them out of court. Your credit report will also show "PAID IN FULL" vs. "FORECLOSURE - COLLATERAL USED". You basically sign away all interest in the property and voluntarily give it back to the bank. See the link below for a better description. I always recommend that any person facing foreclosure to research all their options and WORK WITH YOUR MORTGAGE COMPANY TO RESOLVE THE ISSUE BEFORE THERE IS A ISSUE. Also, document EVERYTHING. http://en.wikipedia.org/wiki/Deed_in_lieu_of_foreclosure The best thing to do in my opinion is to sign a deed in lieu of foreclosure, “if” the bank offers you one. Normally they only offer it to you if there is equity in the property (which is not really the case in our current market). I do not believe there are ANY tax ramifications and the lender is happy to do it as it keeps them out of court. Your credit report will also show “PAID IN FULL” vs. “FORECLOSURE – COLLATERAL USED”. You basically sign away all interest in the property and voluntarily give it back to the bank. See the link below for a better description. I always recommend that any person facing foreclosure to research all their options and WORK WITH YOUR MORTGAGE COMPANY TO RESOLVE THE ISSUE BEFORE THERE IS A ISSUE. Also, document EVERYTHING.

http://en.wikipedia.org/wiki/Deed_in_lieu_of_foreclosure

]]> By: mortgagemess http://housingdoom.com/2008/06/27/1099c-is-jingle-mail-or-short-sale-better/#comment-12726 mortgagemess Fri, 27 Jun 2008 16:30:43 +0000 http://housingdoom.com/?p=1450#comment-12726 For investors..I think they are looking at at 1099 whether they like it or not..Most have mutiple properties that are going back to the lender and as the word "investor" implies, you are investing therefore, taking a "risk". They rolled the dice, most made money during the good years, wasted it and now they want a bailout. Honest borrowers are now paying the price for these investors. Much higher credit scores, larger downpayments, higher interest rates and great chance of being "rejected."Not because the BORROWER is a bad risk, but because investors/flippers/HELCO freaks ruined it for everyone else... Our tax dollars are going to bail out enough people, let them(investors) get a 1099 and pay into the system they ruined..short sale or foreclosure it shouldn't make a difference.. For investors..I think they are looking at at 1099 whether they like it or not..Most have mutiple properties that are going back to the lender and as the word “investor” implies, you are investing therefore, taking a “risk”. They rolled the dice, most made money during the good years, wasted it and now they want a bailout. Honest borrowers are now paying the price for these investors. Much higher credit scores, larger downpayments, higher interest rates and great chance of being “rejected.”Not because the BORROWER is a bad risk, but because investors/flippers/HELCO freaks ruined it for everyone else…

Our tax dollars are going to bail out enough people, let them(investors) get a 1099 and pay into the system they ruined..short sale or foreclosure it shouldn’t make a difference..

]]> By: agnostic http://housingdoom.com/2008/06/27/1099c-is-jingle-mail-or-short-sale-better/#comment-12725 agnostic Fri, 27 Jun 2008 16:22:23 +0000 http://housingdoom.com/?p=1450#comment-12725 Just my two half-pesos, but I would think the elimination of the 1099 issuance would be item #1 for any bailout legislation. Just my two half-pesos, but I would think the elimination of the 1099 issuance would be item #1 for any bailout legislation.

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