Posted on: 09th Jun, 2009 01:03 pm
I have defaulted on a timeshare mortgage and I will be filing for bankruptcy also. In speaking with an attorney, they suggested requesting a dil to avoid forclosure. My understanding is that a 1099 will be issued for the amount of the forgiven loan and this amount will be taxable income that I will have to claim. Is it true, that if I file bankruptcy in the same year, I would be considered insolvent and would not be required to pay tax on the forgiven debt? Is there a specific timeline I should be seeking? dil first then bankruptcy or the reverse? Please advise, thanks.
Hi prr4me,
In my opinion, if you file bankruptcy now, you will not be required to apply for a deed in lieu. If you bankruptcy filing is accepted, the court will order an automatic stay and thus your creditors will not be able to sue you.
Moreover, if you go for a deed in lieu, the taxes charged on the deficient amount can be forgiven depending upon your state laws.
In my opinion, if you file bankruptcy now, you will not be required to apply for a deed in lieu. If you bankruptcy filing is accepted, the court will order an automatic stay and thus your creditors will not be able to sue you.
Moreover, if you go for a deed in lieu, the taxes charged on the deficient amount can be forgiven depending upon your state laws.