Tags: 1099, Bankruptcy, deficiency judgment, Foreclosure
My father’s home recently foreclosed and our bankruptcy lawyer did not file the bankruptcy prior to the foreclosure.
September 14th, 2009 by Jarad S.Question: Hello:
Please help. My father’s home recently foreclosed (last week) and our incompetent bankruptcy lawyer did not know it was important to file the bankruptcy prior to the foreclosure which would have cleared any tax consequences or deficiency judgment against him. Since my father has filed bankruptcy AFTER the foreclosure, I understand the lender will either forgive the debt and issue a 1099 to the IRS or seek a deficiency judgment. My question is, if the lender decides to seek a deficiency judgment, will the deficiency amount be discharged in the bankruptcy – although he filed the bankruptcy after the foreclosure? Please advise. Thanks!
Answer: -More than likely you won’t even have to worry about the deficiency judgment because most lenders don’t file a deficiency judgment against homeowners. It is much more common for them to issue a 1099. But yes, if by chance they did file a judgment against him, filing bankruptcy after foreclosure shouldn’t matter. In fact, most homeowners will file bankruptcy after they are hit with the deficiency judgment so it will be wiped out.
