Foreclosure 1099C

MassBuyer · #1 01-04-2008, 01:03 PM

What is the name of your state? Massachusetts

In Sept 2006 a house my mother and I refinanced was forclosed. She lost her job and I was unable to keep the house afloat with my job alone.

So my mother after the Fc moved to FL,Lender had her new address etc. However went to collect the rest of the money. (which we can not validate since the Lender is in bankrupcy and is basically unethical and just does not care) She moved back to MA and my sister finally forwaded her mail to her and she found a collections agency from the Lender trying to come after the rest of the money. However in Dec 31, 2007 I receive something from our good friends the IRS saying this Lender Forgave my debt (which they never went after me for, not on my credit report etc) therefore i should i have claimed this phantom income on my tax return for 2006, although I never received a 1099C from the company, which is not surprising. Now my question is, how can they forgave a debt that i owed, that was never sent to me, not reported on my credit report etc in 2006 when they were trying to pursue it in Aug 2007. Not only that my guess is the amount is larger than the definciency that was builing in 2007 and added it on and retro'd to 2006.

I just dont understand how they can forgive a debt in 2006 while activily seeking it in late 2007, then report to the IRS while sending me nothing. Now the IRS says I owe 11K. Now I wonder if we can prove insolvency at the time of the debt. We both were not working. I left my job to be a stay at home mom while my mom remained unemployed. We had no assest other than her car which isnt worth much of anything.

Thanks for any feedback if you understood this crazy situation.

Also can we valdiate a debt that was forgiven? I am 99% sure this Lender will not respond to any valdiation correspondence. They basically fired 90% of their workforce. I tried calling them for a 1099C they kept getting confused if i was a former employee. The Lender was never organized even before their downfall.

FlyingRon · #2 01-04-2008, 01:20 PM

They're not apparently seeking it, they're just cleaning up their own tax issues. Yes you should have gotten a 1099, but that's pretty much water under the bridge now, the IRS told you the information that it should have contained, no?

MassBuyer · #3 01-04-2008, 01:50 PM

Well The IRS just stated how much I should have claimed as income. Meaning the Lender's loss. which I have no idea if its true or not. My guess its seriously inflated. They stated I did not have to amend my 2006 taxes, just sign here that I agree, disagree etc. Now I do not know if I should seek a CPA or Tax attorney. This issue is getting more complex as the day goes on. Again this Lender is very sneeky and not to be trusted. We have had to send an attorney after them before. Verifying anything with them will be quite difficult.

HUD-1 · #4 01-04-2008, 02:29 PM

You should know the debt that was owed, or at least have an estimate based on princiapl balance. (make sure you include late fees attorneys fees etc) You can check the land records to see what they sold it for. The resulting deficiency MAY be income for tax purposes. Definitely talk to a tax specialist and hone in on the "insolvency" question.