2 mortgage chargeoff-- tax questions.

Guest 0.10 Dollars($)

I have a 2nd mortgage that will be charged off at the end of the month if we do nothing. We are filing a chapter 13 bankruptcy, but not before this will most likely happen. I know the charge off can be reported as income--when does this happen? What are the ramifications? If we file the bankruptcy, and we are making payments through the court--is it still income? Or do we report that to the IRS too? The last time I talked to the mortgage company--they said we owe more on the house than what it is worth. How does that affect the income reporting? Any and all informations is appreciated--I'm trying to figure out how this affects us completely.

larry · Joined: 27 Jun 2007 Posts: 3328 473.51 Dollars($)

Hi sherrill.

Welcome to the forum. The charge off does not means that the lender has forgiven your debt. Only if the lender forgives the debt then it will be considered as your income and you will have to pay tax on it. BTW Now you need not to pay tax on the forgiven debt even because of the Mortgage Debt Forgiveness Act.

I think you should talk with the second mortgage lender directly and check it out whether they are going to forgive the debt or not. Feel free to ask if you have any further questions.

Best of luck,
Larry

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