Posted on: 31st Jul, 2010 05:39 pm
i forclosed on my home and had a 80/20 loan. they sold the home i recieved a 1099c for the 80% of loan but the 20% they are saying i have to pay. this money was used to purchase the house i have NEVER refinanced before. so on my taxes i had to pay a penalty because they said it was income to me, how is that? would i qualify as this being insolvent debt?
Hi ineverdidever,
In case of a foreclosure, the lender has the rights to come after you for the deficient balance resulting from the property sale. A portion of the loan has been forgiven. Thus, you would be liable for paying the rest of the 20% of the loan. If you're unable to pay the balance dues, then you should speak to the lender and negotiate with him so that he forgives the dues. If the dues are forgiven, it would be considered as an income by the IRS. But again, as the Mortgage Debt Relief Act is in vogue, you won't be liable for paying the taxes for the forgiven amount.
Take care.
In case of a foreclosure, the lender has the rights to come after you for the deficient balance resulting from the property sale. A portion of the loan has been forgiven. Thus, you would be liable for paying the rest of the 20% of the loan. If you're unable to pay the balance dues, then you should speak to the lender and negotiate with him so that he forgives the dues. If the dues are forgiven, it would be considered as an income by the IRS. But again, as the Mortgage Debt Relief Act is in vogue, you won't be liable for paying the taxes for the forgiven amount.
Take care.