received 1099-A from bank and now being harressed by collection agency

[drowningintn]

After 6 months of trying to deal with the mortgage company, they foreclosed and sold our home at auction in July 2012. In January 2013 we received a 1099-A from the mortgage company showing a profit of approximately $13,526. Two weeks ago we received a letter from a collection agency trying to collect the $13,526 and offering a settlement offer of $4500. I called and talked to one of their agents and explained that my husband and I are both in our 70's and only receiving social security and that we depleted our savings trying to hold on to the home that they foreclosed on. He told me that the worst they would do was put a judgement against us but that that was unlikely considering our age. For the past 2 days we have been receiving calls from the collection agency office and they hang up on us when we answere and then call back in 30 minutes and hang up again. When it happened again this morning, I called them back and they were nasty. Are they allowed to harress us like this? Are they even allowed to try to collect what was written off in a 1099-A? I need help understanding this.

[LadyInTheRed]

Was the mortgage discharged in BK? If so, tell the collection agency they are in violation of the court's injunction against collection and that if they call again, you will file a complaint.

[justbroke]

I concur. If this was discharged in a bankruptcy, they have no rights to even attempt to collect the debt and certainly not "threaten" the use of process (a lawsuit) in order to recover a discharged debt.

Please tell me (us) that this was discharged in a bankruptcy.

[frogger]

I don't see where the OP mentioned anything about filing bk.......

@drowningintn - have you received a 1099C as well or just the 1099A?

[justbroke]

Drowning has been a member since 2009 and was planning bankruptcy at that time. We'll just have to see whether the bankruptcy was filed. I will just assume that a bankruptcy was filed back in 2009.

If no bankruptcy was filed and the debt discharged, then the collection agency may employ process and make reasonable attempts (calls and letters) to collect the debt. As frogger was eluding to, it may make a difference whether that's a 1099-A, or a 1099-C which are different (with a 1099-C being a forgiveness of debt).

[drowningintn]

No, the mortgage wasn't discharged in BK. We were trying to sell the house and our realtor had an offer on the house for $89,000 but it would have been a short sell and the mortgage co wouldn't even consider it. They set the auction date and sold it for $83,000 thus creating the $13,526 that's now in collections. We received a 1099-A but not a 1099-C. We never received any paperwork regarding the foreclosure or the sale on the courthouse steps.

We never filed BK because we were able to go on a Balance Liquidation Program with most of our credit card companies and we will have about 90% of our total debt paid off in 32 more months.

[justbroke]

With what you just wrote, I do not understand why you didn't file bankruptcy. But that's another story for another thread.

As for the collection, it appears to be valid and they are entitled to attempt to collect the debt. (They do need to follow the proper procedures.) If you were never notified of the foreclosure, as required under your particular State's laws, perhaps you could seek to have the foreclosure revoked. That would require some leg work and probably hiring an attorney. You should have been told that you were subject to foreclosure, and then the lender should have followed the notification requirements under your State's foreclosure laws.

Who knows... maybe now is a good time to file bankruptcy and even remove the 32 months of "balance reduction" as well!

[IBroke]

For the past 2 days we have been receiving calls from the collection agency office and they hang up on us when we answere and then call back in 30 minutes and hang up again. When it happened again this morning, I called them back and they were nasty. Are they allowed to harress us like this? Are they even allowed to try to collect what was written off in a 1099-A? I need help understanding this.

If they continue bothering you, I'd suggest you send them a cease and desist letter via CMRRR (certified mail return receipt requested) and tell them to stop calling you. That is your right under the FDCPA - even if you owe what they are claiming.

http://credit.about.com/od/debtcolle...collectors.htm

[tobee43]

unfortunately, they have a right to collect this money if it wasn't included in the bk. while they cannot harass you, they can call and bother you.

if all you have as income is ss those funds are exempt. also, if the bank wrote off the lost then it's a write off and you were issued the 1099A and i will take back my first line with respect to your situation. they sold the debt to a third party collector after they wrote it off. being you were issued the 1099A that is proof it was written off as most likely a real estate loss. i would report them asap...file a complaint with the FTC asap!!

[malf1204]

So I am a little confused you have a foreclosure and deficiency on your credit report yet you wanted to pay your CC bills? Why your credit is already toast with the FC

[LadyInTheRed]

A 1099-A was issued because the bank acquired the property from you. It doesn't mean they sold or wrote off the debt and doesn't prevent them from collecting the deficiency. That would only be the case if they issued a 1099-C.

I went back and read your prior posts. It seems that the reason you didn't file BK in 2009 was to protect your home that you owned outright. I'm guessing you decided to take a mortgage to pay off some of your debt. That apparently didn't work out so well for you. Now that you don't have home equity to protect, why not stop with this so-called "balance liquidation plan" and file Chap 7? If you are living on SS only, I'm assuming you will have no problem qualifying for a 7. Stop wasting your money paying creditors, get rid of the debt in 90 days or so and enjoy the rest of your life debt free! You've played the creditors' game on their terms for long enough.

[tobee43]

this is from one of my blogs:

"When a house is foreclosed upon by the bank, the owners typically receive Form 1099-A from the lender showing several pieces of relevant information. The information on Form 1099-A will likely be needed to report the foreclosure properly on your tax return. A foreclosure is treated as the sale of property, and the former property owner will need to calculate their gain or loss on the property. But unlike a normal sale, there's no "selling price," and this is where the Form 1099-A comes into play. What to do with the information found on Form 1099-A has been asked by a number of readers, including "IcelandorBust," who posted this query on the message boards:

"Our home was foreclosed on in July 2009. The bank sold it to a new owner in November 2009. We received a 1099-A in January. We have not received a 1099-C. I have been unable to find a concrete answer as to what to do with the 1099-A."

Under the rules for calculating the tax consequences of a foreclosure, the taxpayer will need figure out the "selling price" so that gain or loss can be calculating. Depending on the type of loan, the taxpayer will utilize either the fair market value of the property or the outstanding loan balance on the property for the selling price. Both of these figures are reported on Form 1099-A. The outstanding loan balance is found in Box 2; the property's fair market value is found in Box 4. The date of the foreclosure is indicated in Box 1, and this will be used as the date the property was disposed of (that is, the "sale date"). Taxpayers will also need to know if the loan was a recourse or a non-recourse loan; the loan was probably a recourse loan if the bank has checked "yes" in Box 5 which asks "Was borrower personally liable for repayment of the debt?"

People might receive multiple Forms 1099-A (one from each lender) for a single property. People might also receive Form 1099-C instead of Form 1099-A if the lender both foreclosed on the property and canceled any mortgage debt for which the borrower was personally liable.

Gain or loss is reported on Schedule D for homes that were personal residences. As a reminder, the IRS does not allow people to claim a loss on personal residences. Any gain (and I have seen situations where a foreclosure results in gain being reported) on personal residences can be offset by the capital gains exclusion for a main home."

lady is correct with respect to the fact they may not have written off the deficit. if that is the case which i doubt, (that write off can take 2 years to show up), they can attempt to collect. however, to really get the money they must get a judgement first. i see you are in tennessee, and they are in fact, a deficiency state, meaning a lender can obtain a deficiency judgment against you.

it may be in your best interest to attempt to settle the matter if you can.

[LadyInTheRed]

lady is correct with respect to the fact they may not have written off the deficit. if that is the case which i doubt, (that write off can take 2 years to show up), they can attempt to collect. however, to really get the money they must get a judgement first. i see you are in tennessee, and they are in fact, a deficiency state, meaning a lender can obtain a deficiency judgment against you.

Why do you doubt they have not written off the debt? The fact that they are trying to collect is a good indication it has not been written off.

I don't believe there is anything to prevent the mortgage company from trying to negotiate payment on a deficiency without first getting a judgment. It's true they can't garnish wages, attach accounts or place liens on property without a judgment. But, they can still try to collect the deficiency or enter into a settlement before going to the expense of filing a lawsuit for the deficiency.

it may be in your best interest to attempt to settle the matter if you can.

I disagree. drowningintn and her husband are in their 70s and have another 32 months before "most" of their debt will be paid off. They already have a foreclosure and a DMP on their credit reports. They've been struggling to deal with their debt since at least 2009. I think it's in their best interest to file BK and put the debt behind them.

[tobee43]

it usually is written off by the time it gets to a 3rd party collector, but the lenders many times take their time writing them off.

yes, i agree that's exactly why i said to try and settle the matter if you can.

you can disagree, with me that is fine, however, that is correct OP is in their 70's and certainly doesn't need the stress of a law suit and a lien against them. if they can settle for much less, i would say do it as opposed to the creditor going to court and then really causing undue stress. as i stated, OP lives in a recourse state and it sounds as though they are going after them for the deficient. i would settle for the 4500 as opposed to 13k, and make small monthly payment otherwise OP will get a lien incur high interest the judgement will be granted for the full amount of deficit, and it's just a lose lose..

[LadyInTheRed]

you can disagree, with me that is fine,

Of course it's fine to disagree as long as it's done in an agreeable manner.

however, that is correct OP is in their 70's and certainly doesn't need the stress of a law suit and a lien against them. if they can settle for much less, i would say do it as opposed to the creditor going to court and then really causing undue stress. as i stated, OP lives in a recourse state and it sounds as though they are going after them for the deficient. i would settle for the 4500 as opposed to 13k, and make small monthly payment otherwise OP will get a lien incur high interest the judgment will be granted for the full amount of deficit, and it's just a lose lose..

If this were the only debt, I'd agree that settlement might be a good option. In this situation, I think BK is a much better option to deal with the deficiency and the OP's other debt. $4500 can pay for a Chap 7 two or three times.

The OP has already lost a home she once owned outright while trying to avoid BK. I think it's time to stop the bleeding.