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1099 Rental Home Liability - BK Chapter 7

Posted on: 28th Dec, 2009 04:19 pm
I was told by my Bankruptcy attorney that as long as my rental home was not reaffirmed (which is wasn't) and discharged on my Chapter 7, all I have to do is submit the 1099 to my tax attorney and he will file the appropriate paper work so I will not be held liable for the loss on the loan - is this correct?

Secondly, this rental home was discharged in my Chapter 7 on Aug. 15th, 2009 - about a month later, I get a court order indicating that this rental home mortage holder has been approved for a relief of automatic stay - is that possible? if so, can I still be forgiven for the 1099?

Thank you much.
Hi pefemezticos,

Form 1099 is filed for cancelled debts. Since you did not reaffirm the mortgage on the rental home, it will be foreclosed by the lender if you stop making payments. If there remains any deficiency from the foreclosure sale of the home, you will have to pay it off. You will be required to fill out form 1099 for the cancelled debt. If the debt is forgiven, it will be considered as your income and you will have to pay taxes on this amount. But once the debt is discharged through bankruptcy Chapter 7, you will no longer be liable to pay taxes on the forgiven debt.

If the mortgage holder has been approved for a relief of automatic stay, they can start foreclosure proceedings on your property. But after the debt is discharged through bankruptcy, you will not be required to pay the deficiency and you do not have to pay taxes on the forgiven debt amount.

Thanks,

Jerry
Posted on: 29th Dec, 2009 01:45 am
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