Hello all,
I think I made a big mistake. I filed chapter 7 in August, and was discharged in November. I intended to reaffirm my mortgage, but actually never did it. I fell behind in my payments, and now got my Notice of Default. I am going to have to let the house go, I don't have anyway to make the lump sum payment, and they aren't going to work anything out. Here are my questions:
1. I know I will get a 1099c, and I am guesstimating it is going to be big, maybe 50k. My mortgage was a refi, with cashout. I think the only way to not be responsible for this tax is insolvency, which is a comparison of my worth vs liabilities. What I need to know is, how do you figure your worth and your liabilities? Since I no longer have any bills, I really don't have any liabilities, except a motorcycle payment that I also did not reaffirm, but have kept current. As for worth, just my house contents and the motorcycle itself.
2. Since I never actually reaffirmed, could the deficiency be part of my BK that closed in Nov.?
I know I botched this up, but, I really tried to hold onto the house, but couldn't do it.
Thanks for any input.
EDITED:
OK, I just checked my credit report, and the mortgage shows as discharged through chapter 7 bankruptcy. So, now my question is, would a deficiency be considered discharged debt, like in the same way a repossed motor vehicle is?
I'm hoping I get no 1099c.
thanks again.
EDITED AGAIN:
Allright, I think I answered my own questions. By filing chapter 7, my mortgage was automatically discharged. Because of this, I should not receive a 1099c. In the event I do receive one, I should inform the IRS I am exempt because the debt was discharged in chapter 7 bk. I found this on another forum:
You do not have to pay the taxes on a 1099c if you filed bankruptcy or you are insolvent, meaning your debts and more than you assets. You will need to send the irs a letter of insolvency (Sample Below). If you are contacted by the IRS, respond in a timely manner, or you will be taxed and penalized for the 1099c.
If the 1099c issuer places a fraudulent amount on the 1099c, the IRS will rarely go after that collection company. Report it anyway to the IRS enforcement.
You best course of action is to file a civil suit against the collection company for fraud and deceptive business practices. In most states you can collect actual damages, attorney fees, court cost, and punitive damages up to 3 times the amount you were defrauded. Most of these companies are required to post a bond with the state, which makes them attactive to collect judgments.
It is important you keep all statement and correspondance from these companies. Also get a copy of your credit report every year.
==============
Sample Letter to the IRS regarding 1099C
(Your Address)
(City, State ZIP)
(Date)
Internal Revenue Service
(IRS’s Address)
(City, State ZIP)
Re: (Your Name and Social Security Number) .
I received a 1099-C form for the tax year (the year which you got the 1099-C for) from
(Name of creditor company or bank) in the amount of $ (fill in the amount listed on the 1099-C).
My debt to (Name of creditor company or bank) was a (Type of debt such as credit card, personal
loan, deficiency balance on repossessed car) that I was unable to pay off.
This charged off or cancelled debt is taxable income, unless
one of the five exceptions applies. I believe my case qualifies for the following common exception :
(Check one of the following boxes, depending on your situation.)
( ) Insolvency - My liabilities (money I owed, including the amount on the 1099-C) were greater than
my assets (all of the money and property I owned) at the time the debt was forgiven. An itemized list of my
liabilities and assets at that time is attached for your information.
( ) Bankruptcy - The obligation to pay the debt to (Name of creditor company or bank)
was discharged in bankruptcy case number (Fill in your case number here). For your information,
I have attached a copy of the page from my bankruptcy schedule where I listed the debt to this creditor, and
the notice “Discharge of Debtor in a Chapter 7 Case”.
Because the above exception applies, I have not included the amount reported on the 1099-C on my tax
return.
Thank you.
Very Truly yours,
(Sign your name and print your name under your signature)
Attachments
Check one of the following boxes to explain what you are including with this letter.)
( ) Statement of liabilities and assets
OR
( ) “Schedule F” AND “Discharge of Debtor in Chapter 7 Case.”
11:56 AM
I think I made a big mistake. I filed chapter 7 in August, and was discharged in November. I intended to reaffirm my mortgage, but actually never did it. I fell behind in my payments, and now got my Notice of Default. I am going to have to let the house go, I don't have anyway to make the lump sum payment, and they aren't going to work anything out. Here are my questions:
1. I know I will get a 1099c, and I am guesstimating it is going to be big, maybe 50k. My mortgage was a refi, with cashout. I think the only way to not be responsible for this tax is insolvency, which is a comparison of my worth vs liabilities. What I need to know is, how do you figure your worth and your liabilities? Since I no longer have any bills, I really don't have any liabilities, except a motorcycle payment that I also did not reaffirm, but have kept current. As for worth, just my house contents and the motorcycle itself.
2. Since I never actually reaffirmed, could the deficiency be part of my BK that closed in Nov.?
I know I botched this up, but, I really tried to hold onto the house, but couldn't do it.
Thanks for any input.
EDITED:
OK, I just checked my credit report, and the mortgage shows as discharged through chapter 7 bankruptcy. So, now my question is, would a deficiency be considered discharged debt, like in the same way a repossed motor vehicle is?
I'm hoping I get no 1099c.
thanks again.
EDITED AGAIN:
Allright, I think I answered my own questions. By filing chapter 7, my mortgage was automatically discharged. Because of this, I should not receive a 1099c. In the event I do receive one, I should inform the IRS I am exempt because the debt was discharged in chapter 7 bk. I found this on another forum:
You do not have to pay the taxes on a 1099c if you filed bankruptcy or you are insolvent, meaning your debts and more than you assets. You will need to send the irs a letter of insolvency (Sample Below). If you are contacted by the IRS, respond in a timely manner, or you will be taxed and penalized for the 1099c.
If the 1099c issuer places a fraudulent amount on the 1099c, the IRS will rarely go after that collection company. Report it anyway to the IRS enforcement.
You best course of action is to file a civil suit against the collection company for fraud and deceptive business practices. In most states you can collect actual damages, attorney fees, court cost, and punitive damages up to 3 times the amount you were defrauded. Most of these companies are required to post a bond with the state, which makes them attactive to collect judgments.
It is important you keep all statement and correspondance from these companies. Also get a copy of your credit report every year.
==============
Sample Letter to the IRS regarding 1099C
(Your Address)
(City, State ZIP)
(Date)
Internal Revenue Service
(IRS’s Address)
(City, State ZIP)
Re: (Your Name and Social Security Number) .
I received a 1099-C form for the tax year (the year which you got the 1099-C for) from
(Name of creditor company or bank) in the amount of $ (fill in the amount listed on the 1099-C).
My debt to (Name of creditor company or bank) was a (Type of debt such as credit card, personal
loan, deficiency balance on repossessed car) that I was unable to pay off.
This charged off or cancelled debt is taxable income, unless
one of the five exceptions applies. I believe my case qualifies for the following common exception :
(Check one of the following boxes, depending on your situation.)
( ) Insolvency - My liabilities (money I owed, including the amount on the 1099-C) were greater than
my assets (all of the money and property I owned) at the time the debt was forgiven. An itemized list of my
liabilities and assets at that time is attached for your information.
( ) Bankruptcy - The obligation to pay the debt to (Name of creditor company or bank)
was discharged in bankruptcy case number (Fill in your case number here). For your information,
I have attached a copy of the page from my bankruptcy schedule where I listed the debt to this creditor, and
the notice “Discharge of Debtor in a Chapter 7 Case”.
Because the above exception applies, I have not included the amount reported on the 1099-C on my tax
return.
Thank you.
Very Truly yours,
(Sign your name and print your name under your signature)
Attachments
Check one of the following boxes to explain what you are including with this letter.)( ) Statement of liabilities and assets
OR
( ) “Schedule F” AND “Discharge of Debtor in Chapter 7 Case.”
11:56 AM
| 341: 2009-12-14: | DISCHARGED: 2010-02-09 
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