Can lender issue 1099 and pursue a judgment too?

[MDC29]

What is the name of your state (only U.S. law)? Nevada

"Many lawyers and so-called experts are of the opinion that a lender cannot pursue a deficiencey judgment once it has decided to write off the debt and issue a 1099. This is untrue! The lender may BOTH write off the debt for financial purposes, issue a 1099 to obtain the tax deduction, and legally pursue collection activities."
Source: http://returnthedeed.com/what-is-a-deficiency-judgement/

Is this true? It doesn't seem logical that they can write off the debt and get the tax deduction, and then turn around and pursue?

 

[Zigner]

What is the name of your state (only U.S. law)? Nevada

"Many lawyers and so-called experts are of the opinion that a lender cannot pursue a deficiencey judgment once it has decided to write off the debt and issue a 1099. This is untrue! The lender may BOTH write off the debt for financial purposes, issue a 1099 to obtain the tax deduction, and legally pursue collection activities."
Source: http://returnthedeed.com/what-is-a-deficiency-judgement/

Is this true? It doesn't seem logical that they can write off the debt and get the tax deduction, and then turn around and pursue?

Sure they can. They will simply make another entry on their books if payment is received.

 

[davew128]

Sure they can. They will simply make another entry on their books if payment is received.

Well its not that simple. The bookkeeping aspect is easy. The fact is, the issuance of the 1099 is SUPPOSED to be based on any of a number of definable events that indicates that the lender cannot or will not pursue further collection activity. That's based on IRS regulations for the issuance of the 1099-C. The reverse is NOT true however in that issuing the 1099-C has no bearing on the collectability of the debt, which is a matter of state law. The IRS regs don't and cannot address the ability of the creditor to continue collection activities. It simply isn't an IRS matter.

Now if the creditor issues the 1099 and continues collection, assuming state law allows them to continue collection, the remedy is that the 1099 is facially void and if the debor is challenged for not including the amount as income, the response is that the debt has NOT been discharged.

 

[MDC29]

apparently, it's not simple at all: http://www.leagle.com/decision/In+BCO+20130514530
In some cases, it seems the court agrees that the lender cannot write off the deficiency, as well as pursue the borrower for it.