Important Question

[cschon911]

We filed Bankruptcy Chapter 7 no asset case in Oct. 05. It was discharged
in Feb. 06. Our house went into foreclosure. We surrendered the home
at the end of April 06. The mortgage company was aware of us moving
out.
We just received documents from the mortgage company (who rebought
the house at auction in May 06). They are for tax purposes. Form 1099-A Acquisition or Abandoment of secured property. We had no equity in the
house. We had bought it for 181,000. The house was actually worth
much less. We were ripped off bigtime by the man who sold us the house.
His "friend" assessed the house for much more than it was worth, and us
not having a lawyer, (dumb, I know, we trusted the jerk), he got away
with it. Selling it to us for alot more than it's value.

I understand the mortgage company has to file the 1099-A form with
the internal revenue service, but what does it mean? We couldn't
possibly owe money on a home that was included in our bankruptcy
and surrendered a long time ago? Does anyone know ?

[SamanthaJones]

Uh-oh.

You filed BK, then a few months LATER foreclosed. You now owe income taxes on the amount in the 1099. (If the amount they claimed as a loss is $30,000- that's the amount you have to include as income for 2006). YIKES!

[poorme]

Was the home mortgage included in the bk? My former mortgage company also gave me a 1099, but my attorney had them correct it, saying they weren't supposed to do that. Who was your mortgage holder? Option One was mine, they don't have a great track record in this area, one dept. doesn't know what the other is doing.

[BK'd-Betty]

Unless the mortgage was included in the BK without reaffirmation.

You filed BK, then a few months LATER foreclosed. You now owe income taxes on the amount in the 1099. (If the amount they claimed as a loss is $30,000- that's the amount you have to include as income for 2006). YIKES!

[SinkingFast]

You filed BK, then a few months LATER foreclosed. You now owe income taxes on the amount in the 1099. (If the amount they claimed as a loss is $30,000- that's the amount you have to include as income for 2006). YIKES!

If they filed an Intent to Surrender the house and included the loan in BK, they don't owe taxes on the mortgage company's loss.

When the Lender auctioned the house, proceeds from the sale went toward pay-off of the Mortgage. Any remaider of the mortgage owed automatically became Unsecured debt that was discharged, along with all other debt included in the filing, by the BK.

The timing of the actual Sale has nothing to do with whether or not the debt was discharged. Some States, Foreclosures move quickly and the Sale happens within a month or 2 of the BK. Other States, Foreclosure Sales don't happen for a year, 18 months, as much as 2 years.

Samantha,.......... You really need to be more careful with your responses so as not to scare people needlessly.

[BassBoy]

I believe that the only way the mortgage co. could use a 1099 is if they forgave the debt/deficency, and that would be considered a "gift" of money. Then yes, one would need to claim that as additional income. If the debt/deficency was included in the BK, the filer is not respnsible to pay it or claim it as income.

[SamanthaJones]

Short sale/1099 article:

www.com, February 2007 newsletter. Very complicated scenario!

[BassBoy]

Your directing us to read about a Short Sale/DIL. Of course any deficency "forgiven" by the lender would need to be listed as income on income tax filing.....BUT.....we're talking about Foreclosure and BK. This is plain and simple, BK relieves the debtor of financial responsibility and the ENTIRE amount/balance is eliminated....so....if the lender was to lose $250K after the sale of the home, TOO BAD. It's their loss.

[SinkingFast]

www.com, February 2007 newsletter. Very complicated scenario!

Whatever the article was/is that you were trying to link to, the link you posted doesn't show the article. Your link just takes users to the Foreclosure.com homepage. There's no info there.

[SinkingFast]

Your directing us to read about a Short Sale/DIL. Of course any deficency "forgiven" by the lender would need to be listed as income on income tax filing.....BUT.....we're talking about Foreclosure and BK. This is plain and simple, BK relieves the debtor of financial responsibility and the ENTIRE amount is eliminated....so....if the lender was to lose $250K after the sale of the home, TOO BAD. It's their loss.

Yeah, BassBoy.

I looked at the various articles at Foreclosure.com that are available for public viewing. None had anything to do with the tax implications of Foreclosure and filing BK. The only reference to filing BK was the typical,.........."Eeeewwww!! BK will ruin your Credit" comments.

[BassBoy]

I think this is the article.

http://www.foreclosure.com/articlecenter.html?action=displayArticle&articleId=1262&isLatest=true

[SinkingFast]

From that article you linked, BassBoy:

"If you let the property go to foreclosure sale, why file bankruptcy? That makes no sense unless you have other extensive debts such as credit cards you just can't afford to pay. Should you file bankruptcy while the foreclosure is pending, that delays foreclosure but doesn't prevent it.

Filing bankruptcy can be a major mistake, which will haunt you for years. Before you can file bankruptcy, federal law now requires you to get credit counseling.

If you sell the property at market value but that's not enough to pay off the mortgage and other costs of the sale, you can pay the deficit out of your pocket and walk away happy that you don't have a foreclosure, short sale or deed in lieu of foreclosure on your credit reports. Talk to your lender now to work out the best solution for both parties."

The last paragraph has nothing to do with BK. Not the "pay off the mortgage" and "pay the deficit out of your pocket". Also the "don't have a foreclosure, short sale, or deed in lieu" on your Credit Reports. None of that has anything to do with filing BK. That's recommendations for how to dodge having any of that show on your Credit Reports. Provided, of course, you have a few thousand dollars <<cough, cough>> laying around to pay a mortgage Lender with.

If we had that kind of money, we wouldn't be in Foreclosure or BK to begin with.

[cschon911]

1099 A

We filed for bankruptcy mainly because of the house. It was 2 mortgages.
Both were listed in the bankruptcy. We knew from the start we were not
keeping the house. We were stuck with a 2 yr ARM mortgage and we basically were ripped off by the man who sold us the house. Long story.
We filed bankruptcy after one missed mortgage payment. We also listed summer taxes 2800.00 that we could not pay.

[BassBoy]

Then the answer(s) is/are simple: You DO NOT owe any deficency and you DO NOT have to claim any deficency as income.