Selling a Rental property and 1099 question

[JOEYBOY]

I just got the court approval to short sale a rental property the 1st loan will be paid in full the 2nd loan will be short 50K
I'm still active in my chapter 13 (3 yrs paid) 2 more to go .... my question is will i be hit with a deficiency Judgement and get a 1099 from the bank to pay taxes??
does anybody know

[HHM]

Interesting....

Will you get a 1099, yes. But that is not the issue, the 1099 is merely a reporting document and the lender is required to issue it. Receiving a 1099 doesn't mean you are actually liable to pay tax.

You will not be hit with a deficiency in the sense that you are liable for the debt, that debt is part of the BK, regardless.

As for the tax liability itself, that is an interesting situation. Strictly speaking, the exception to pay tax on Forgiven Debt Income is if the debt is "discharged" in bankruptcy, and as you are aware, you are in the middle of a chapter 13 and have not received your discharge. Moreover, since the property in question is an investment property, can't use Mortgage Debt Forgiveness Act. You are probably only left with insolvency.

To honest, I am stumped, I don't know the answer. But I suspect, you won't be able to use bankruptcy as the reason to get out from under the potential tax liability.