Second Mortgage Collections. Need to pay off but wondering about taxes.

[vki]

I was in an crappy situation where I was helping my parents get a second mortgage under my name from their home. Well everything failed during the crisis and now I owe Chase $130,000. I have received a collections letter stating that they would let me pay it off for around $30,000. I have a few questions. Is that $30,000 offer they sent me negotiable? I am at a point where I can finally pay it off but I am now also worried about the tax implications. If I do pay this off, what kind of tax would I need to pay? Is the tax payment negotiable as well? Thank you for your guys' help!

[despritfreya]

Welcome to the forum. . .

I cannot tell you the tax ramifications if you settle and then receive a 1099-C for the amount that is "forgiven". Such would depend on many factors including whether or not you were "insolvent" at the time of the "forgiveness". Check with your tax preparer.

Can you negotiate the $30k? Of course you can. Whether or not such negotiations will reduce what the lender will agree to is the question.

If you do owe income taxes, is the amount negotiable? Probably not unless you request and are granted an Offer-In-Compromise.

If you are contemplating a bk it would make little sense to settle with Chase as the debt would be discharged.

Des.

[tobee43]

you can make a conditional contract with the bank on the settlement that there will be no deficiency after you payment including NO 1099 A or C's and the payment is consider "in full" we did this with a DIL with well more than 100k involved. the lender signed the contract and we settled. in the case of the second i would try and settle with that condition. or as des calls it a " Offer-In Compromise".

[spidge]

I read these threads from time to time and maybe I am just paranoid, but there is rarely talk of removing the liens in these settlement talks. I would insist on the verbiage to include removing the lien as part of the settlement.