Two Mortgages and a Short Sell AND 1099 question

[bibbymax]

I have gone through the Chapter 7 process, including the 341 meeting and my debts should have been discharged last Monday (still no word in the mail).
I have put my house on the market with a broker who has found two buyers, one who has put down cash in the amount of 20% of the selling amount.
Okay now I have a first mortgage with EMC for $172,000 and a equity line of credit with HSBC in the amount of $45,000. If the short sell goes through, in the selling amount of $165,000, what will the 1099 amount be that I get? Will it be the $7,000 with EMC and the $45,000 with HSBC(equity line of credit)? Or will it just be the EMC amount? I'm in the 15% tax break range, so my realty broker was saying that I will get a 1099 off the EMC amount which will total around $1200. I just don't fully believe him and I don't have an attorney to ask these questions.
EMC is willing to go through the short sell process, but will HSBC have to okay the short sell also since they are receiving no money?

[kiddles]

If you didn't reaffirm the mortgages in the BK, you have no debt after the sale and thus no 1099.

If you re-affirmed, you will have as debt the difference between what you owe and the sale price, and 1099's for that amount.

[needafreshstart]

I'm confused did you list both mortgages in the chapter 7 filing? If so you would not get a 1099 for the balance. Unless you reafirmed then decided to sell, doesn't make much sense to that when both mortgages would have been discharched in BK. What is the house appraised at? Yes HSBC will have to approve. Did you tell your realtor you filed BK?

[RickInMich]

I think HSBC has to approve the short sale, too. It may be that if the value of the home is less than the first mortgage, then they don't have to approve it. But I'm not certain. However, it would seem to me HSBC would not release their lein unless they agree to a short sale.

I have a similar situation. If I'm wrong, I hope someone points that out.

[bibbymax]

Yes I listed both mortgages on the bankruptcy as secured debt but did not reaffirm with either of the two. The house is "appraised" at $196,000 according to zillow. My realtor is aware of the bankruptcy and is aware that the sell date with the county is in December. I'm asking these questions because I pulled out of the sell in fear of the 1099. The realtor has contacted the buyer to see if they are willing to write myself a check for the 1099 amount and a little extra towards me. The buyer is very motivated to get my home. Weird to me since there are so many other homes on the market.

[BassBoy]

No reaffirmation means no debt owed, however as RickInMich pointed out, and maybe someone can clarify, the lender(s) will have to agree on the sale.

[HHM]

When it comes to short sales, re-affirmed or not, ALL lien holders must approve the sale.

Only foreclosure eliminates subordinate liens, but if you sell the home, you either need to pay the lien holders in full, or get their consent to pay them less than what is owed. It is the only way to pass clear title to the buyer.

A bankruptcy has no effect on a creditors lien or the amount they can claim for that lien. The only thing discharged in the BK is the debtors personal liability to pay the debt.

[needafreshstart]

If both were listed and not reaffirmed you will not get a 1099. Have you contacted HSBC at all. I was trying to sell my house with 2 mortgages similar to your situation. Our second mortgage company was very strict on what the selling price of the house had to be. I may be wrong but I can't see where they would allow the sale with the house being appraised that high, even though market price is way less. Where the second mortgage would be discharged that may change things.

[bibbymax]

Thank you all for the information! I feel a lot better about my decision now compared to this morning! The main thing I need to do is contact HSBC about the short sell, to make them aware of what is going on and to see if they have any issuses regarding the selling price.

[CindyLou]

Someone correct me if I'm wrong, but if you filed Chapter 7 and included the house then you don't HAVE to sell to get out of the house and it will not change what appears on your credit report whether you sell or walk away. It will not be listed a foreclosure because it has already been included in BK. You can basically just 'give it back' to the bank and be done.

May I ask your reason for wanting to sell vs. giving up the house?

(someone tell me if I'm missing something big here)

[ssdsco]

I thought you could get a 1099 no matter what you did....foreclosure, deed in lieu, short sale, bankruptcy, no bankruptcy.

Then to avoid paying the tax on the 1099 you have to file an additional form with your tax return claiming insolvency which BK7 filers should be able to do.

Very confused ??

[CindyLou]

If you file BK before you do any of the above then there will be no 1099, however if you alreday did any of the above and already have a 1099 on the way then BK won't fix it...then you claim insolvency.

for a fact: they can't 1099 you on a debt that's been discharged in full. so if you file first, then act on the house or walk a way...no 1099. Any comments on my theory?

[BassBoy]

I think you summed it up quite well cindylynn.

[bibbymax]

Okay so since I filed for bankruptcy in July of this year and went through the 341 and my debts should have been discharged two Monday's ago, I'm okay in selling the house? Is there a way to find out about my debts being discharged? I have yet to receive any letters from the court.
I'm only going to sell my home, if the second mortgage okays it, because the buyer is offering me cash on the side to sell them the home, so I can move into a rental home. The buyer also offered to pay for the 1099 if I were to receive one, but from what everyone is saying, I will not be receiving one.

[needafreshstart]

Here's the problem, the second mortgage company isn't going to sign off when there getting nothing and the buyer is paying you directly. Unless it is a hush-hush under the table payment, someone with a better knowledge of real estate laws can answer whether that is even legal. Someone else also would have to answer if you have to lift the stay since your bk isn't closed before you can sell.