Posted on: 16th Sep, 2009 01:07 pm
Our 2nd mortgage with HFC beneficial has been charged off for $104,000. We had been put into their hardship program, but our payments kept being sent back by HFC. After monthly conversations with the collections people, in July a representative said that we had exhausted our 6 months in the hardship plan but he was submitting us to get back into the program and that we would be notified of when and how much we should pay. My hubby called today to check on the status and we were informed that our account was charged off and that he would be sent a 1099. I have a couple of questions.
If we let the charge off stand,we have the tax implications to consider and would have to pay that off. Once we pay off the tax implications, can the mortgage company still come after us since it was their decision to charge off?
Our first mortgage is current, if we try contacting them to make payment arrangements can they try to foreclose on our home?
If we do nothing and pay off the tax implications, what will happen seven years from now and this (hypotetically) falls off of our credit...will we be able to buy new property or will the charge off come back to haunt us?
If the mortgage company hires a collection agency, what do we do if we are paying the tax penalty?
Signed...
Oldschoolmommy who is very confused and wants to do the right thing.
If we let the charge off stand,we have the tax implications to consider and would have to pay that off. Once we pay off the tax implications, can the mortgage company still come after us since it was their decision to charge off?
Our first mortgage is current, if we try contacting them to make payment arrangements can they try to foreclose on our home?
If we do nothing and pay off the tax implications, what will happen seven years from now and this (hypotetically) falls off of our credit...will we be able to buy new property or will the charge off come back to haunt us?
If the mortgage company hires a collection agency, what do we do if we are paying the tax penalty?
Signed...
Oldschoolmommy who is very confused and wants to do the right thing.
Hi,
When your mortgage company charges off your loan, it generally means that they've sold off the debt to another company for collections. It does not mean the debt is forgiven. But in your situation, it looks like they've forgiven your debt, which is why they're going to send you 1099 form. In case they've forgiven the debt, they cannot come after you to recover it in future. Thus, it is very important for you to get some official confirmation from them that they've indeed forgiven the debt. You must have some kind of written document from them in support of the fact that you no longer owe them any money.
If you're current on your first mortgage, it's better to continue making the payments. As long as it is current, the lender will not foreclose on your house. If you're finding it difficult to make the payments, you can request them to do a loan modification. This can lower your monthly payments.
As far as the tax implications on the forgiven debt is concerned, you will have to pay taxes on this amount. You'll be required to fill out the 1099 form for this purpose. However, you may also qualify for an exemption from the tax under the Mortgage Forgiveness Debt Relief Act.
When your mortgage company charges off your loan, it generally means that they've sold off the debt to another company for collections. It does not mean the debt is forgiven. But in your situation, it looks like they've forgiven your debt, which is why they're going to send you 1099 form. In case they've forgiven the debt, they cannot come after you to recover it in future. Thus, it is very important for you to get some official confirmation from them that they've indeed forgiven the debt. You must have some kind of written document from them in support of the fact that you no longer owe them any money.
If you're current on your first mortgage, it's better to continue making the payments. As long as it is current, the lender will not foreclose on your house. If you're finding it difficult to make the payments, you can request them to do a loan modification. This can lower your monthly payments.
As far as the tax implications on the forgiven debt is concerned, you will have to pay taxes on this amount. You'll be required to fill out the 1099 form for this purpose. However, you may also qualify for an exemption from the tax under the Mortgage Forgiveness Debt Relief Act.