BOA --- Sent a Fed Ex Document saying my 2nd mortgage is forgiven

[Fallonedward]

Hi Everyone:

I went thru a 7 over a year ago, discharged with no problems... When I got home tonight my son told me that a Fed Ex package got delivered to our house. BOA Home Loans NA states in the enclosed document that our Home Equity account has been approved for a principal forgiveness program as a result of the Department of Justice and State Attorney general global settlement.

It states full forgiveness of the remaining principal balance of $79,674.42 on the Home Equity line of Credit. This is the exact amount we owed prior to them adding all the late fees.

Now the two parts that scare me:

Your acceptance of this offer is automatic and they are required to report this to the IRS as a tax liability....

I'm concerned as I really can not afford to pay a tax liability at this time, we stayed in our house and continued to pay our 1st mortgage and stopped paying the 2nd 3 months prior to declaring BK.

Does anyone know anything about this??????

thanks

[Epic]

I'd like to know if anyone knows about this as well. I received the same letter. However, mine was included in BK7 almost two years ago. It's reporting as IIB.

[Fallonedward]

I'd like to know if anyone knows about this as well. I received the same letter. However, mine was included in BK7 almost two years ago. It's reporting as IIB.

Epic, mine is reporting as IIB as well... My concern is that I will have to come up with tax money since they are noticing the IRS... I just need to know what the ramifications are...

[aaofu]

I got the same they wrote off over $180k. Two things are imortant about this

1. I already do not owe the money since it was iib 4 years ago however they are releasing the lean on my home which is huge.

2. there should be no tax liability since I do not owe it after the iib. It is owed just not by me anymore and now not owed at all and the lein in released.

This is something that as soon as my house value raised enough I new they would raise their head to forclose on my home (as soon as it made sense for them) now I do not need to worry.

Nice

[ValleYum]

Congrats Fallon! I am very happy for you and your family!!

It may be worth a $100-200 appointment with an accountant to ease your fears.

My personal thought is that this debt was IIB so the bank sending you a 1099A or a 1099C is just a paperwork thing and will not affect you since this debt was taken care by virtue of your BK - but please ask a professional so you don't get somehow get slammed with a tax debt.

[bcohen]

If you already discharged the debt in bankruptcy, then there is no "income" from the forgiveness of this discharged debt. The bank will still file a 1099-C with the IRS, however you do not have to pay taxes or list the forgiven debt as income. You simply file a Form 982 (http://www.irs.gov/pub/irs-pdf/f982.pdf) and indicate that the debt was discharged in a Title 11 case (bankruptcy). So don't worry about owing taxes. Just make sure that the lien is actually released, because the mere "forgiveness" of the alleged debt with regard to you personally is worthless--you already accomplished that through bankruptcy!

[Fallonedward]

If you already discharged the debt in bankruptcy, then there is no "income" from the forgiveness of this discharged debt. The bank will still file a 1099-C with the IRS, however you do not have to pay taxes or list the forgiven debt as income. You simply file a Form 982 (http://www.irs.gov/pub/irs-pdf/f982.pdf) and indicate that the debt was discharged in a Title 11 case (bankruptcy). So don't worry about owing taxes. Just make sure that the lien is actually released, because the mere "forgiveness" of the alleged debt with regard to you personally is worthless--you already accomplished that through bankruptcy!

Thanks, this is great to know... Do you know how I could make sure that the lien is actually released?

thanks

[despritfreya]

Do you know how I could make sure that the lien is actually released?

At some point you will receive a Deed of Release and Reconveyance or some other document officially releasing the mortgage lien. This document will also be recorded in your County Recorder's Office. How long that will take is anyone's guess.

Des.

[Fallonedward]

At some point you will receive a Deed of Release and Reconveyance or some other document officially releasing the mortgage lien. This document will also be recorded in your County Recorder's Office. How long that will take is anyone's guess.

Des.

Thanks Des

[tobee43]

Hi Everyone:

I went thru a 7 over a year ago, discharged with no problems... When I got home tonight my son told me that a Fed Ex package got delivered to our house. BOA Home Loans NA states in the enclosed document that our Home Equity account has been approved for a principal forgiveness program as a result of the Department of Justice and State Attorney general global settlement.

It states full forgiveness of the remaining principal balance of $79,674.42 on the Home Equity line of Credit. This is the exact amount we owed prior to them adding all the late fees.

Now the two parts that scare me:

Your acceptance of this offer is automatic and they are required to report this to the IRS as a tax liability....

I'm concerned as I really can not afford to pay a tax liability at this time, we stayed in our house and continued to pay our 1st mortgage and stopped paying the 2nd 3 months prior to declaring BK.

Does anyone know anything about this??????

thanks

since the discharge was prior to 2013 this would fall under the current act the Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. the fact you listed it on your bk petition you'll be fine there is no tax ramifications. as des points out make certain the paper work includes the deed of release and reconveyance ...it's usually just one page

[Fallonedward]

since the discharge was prior to 2013 this would fall under the current act the Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. the fact you listed it on your bk petition you'll be fine there is no tax ramifications. as des points out make certain the paper work includes the deed of release and reconveyance ...it's usually just one page

Tobee....so nice to see you and thanks so much.....

[IBroke]

since the discharge was prior to 2013 this would fall under the current act the Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. the fact you listed it on your bk petition you'll be fine there is no tax ramifications. as des points out make certain the paper work includes the deed of release and reconveyance ...it's usually just one page

I just noticed that the forgiven debt was a HELOC so I guess the question if the Relief Act would have applied could have been a bit more problematic (in this case, what was the money used for?). However, since the debt was IIB, it doesn't matter. All these things tend to remind me of the fact how wonderful a BK can actually be.

Now, once this Act expires, the advantages of a BK might even get bigger - especially with potential lien stripping options.

[tobee43]

Tobee....so nice to see you and thanks so much.....

so nice to c u 2! this will be an excellent way to get rid of that mortgage once and for all! best of luck with it.

IBroke, yes, since it is IIB it really shouldn't be a problem. we will see how those "new" potential lien stripping options work for 7's. i'm still not really clear on that one. i'd rather deal with a congressional act protecting the situation. although, a clearly defined law in the fed bk codes could do it.

[Fallonedward]

so nice to c u 2! this will be an excellent way to get rid of that mortgage once and for all! best of luck with it.

IBroke, yes, since it is IIB it really shouldn't be a problem. we will see how those "new" potential lien stripping options work for 7's. i'm still not really clear on that one. i'd rather deal with a congressional act protecting the situation. although, a clearly defined law in the fed bk codes could do it.

So with BoA releasing the lein, I would not need to strip the HELOC, wow.... this is getting better and better and I can now start doing repairs on this house and not worry it will be taken away from me....thanks

[tobee43]

So with BoA releasing the lein, I would not need to strip the HELOC, wow.... this is getting better and better and I can now start doing repairs on this house and not worry it will be taken away from me....thanks

unless the bk courts pass something to contrary, which would be after the fact anyway, exactly.