Posts Tagged ‘1099’

Question: We don’t know what to do, we have 2 houses in Arizona, 1st house we took out a loan of $60k (leaving us a loan amount of $220k) and used those $60k to build our 2nd home which is now our primary residence we have been living in it for 1yr 4months and we were renting out the 1st house to help us pay the loan, but now we have been unable to get renters in and my husband got fired from work and has been unable to find a job, this month will be our first month not be able to make the mortgage payment, I called the bank and they told me that they were unable to modify our loan since we have 2 houses and 1 is not owner occupied. I spoke to anther department and asked them about a deed in lieu foreclosure, all they told me was that the house would need to be in short sale for 90 days before they could talk to me about that. So my question is if the house sell in short sale or if I give the house back to the bank deed in lieu foreclosure can they come after our primary residence to collect money and if they will can I change the deed of trust to owner primary home (which is free and clear of any loans) before the bank tries to get involved to someone elses name so the bank wont take away our primary residence away? Thank you.

Answer: -This is a very common question…can the bank come after my other assets if I do a short sale, deed in lieu foreclosure or it just goes to auction.  The answer is “NO”.  When you signed the paperwork with the bank it specifically states that the home would be sufficient collateral for the loan.  The only way they could come after other assets is if you pledged them as additional collateral in order to get the loan.  So you don’t have anything to worry about.  What you do have to worry about is a deficiency judgment where the lender can sue you for the difference that was not collected.  Although this procedure is not common at all, it does happen once in a while and is more common in mortgage states.  It does not happen very often because homeowners will just file bankruptcy and wipe it out altogether, which means the bank loses even more money.  So more often they will issue the homeowner a 1099 for the amount they lost, which could be a significant amount.  That is why a short sale is a better alternative because it’s less damaging on your credit, you can eliminate the deficiency judgment altogether if done properly, and in many cases you don’t have to pay as much when they 1099 you.

Question: WHAT IS WORSE A DEFICIENCY JUDGMENT OR A 1099 IN THE AMOUNT OF $120,000.00

Answer: -Most homeowners would take the 1099 over a deficiency judgment because in most cases you can counter the 1099 with IRS form 982.  Talk to your accountant because you may not have to pay a dime.

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.

Question: I have a mortgage and home equity line of credit on the same property with Countrywide. I am in Florida. If my property is foreclosed upon what happens to the home equity line of credit? Also am I held liable for taxes up to the foreclosed date?
Thanks

Answer: -If your home has a first and second with the same lender, Countrywide, it’s almost treated like it’s one loan.  If they send it through foreclosure, they’ll probably start at just what’s owed on the first and hopefully get someone to bid on it…If no one bids then they’ll end up with the property.  Then they’ll probably write off that 2nd in which they could file for a deficiency judgment but more than likely they will 1099 you for that amount they lost and you’ll have to pay taxes on it.  As for the property taxes, they’ll have to pay those in order to sell it to an end buyer.

Question: I have an investment property in California that foreclosed, now I have a differdent company NARS calling me regarding that line of credit that I owed the to Chase. They want me to pay the whole 53,000 in full or make payments on it. I currently live in NC. Can they lien my home in NC or garnish my wages?
Thanks,

Answer: -If they file a deficiency judgment against you, yes you’ll have to pay them and that judgment may be able to attach to other properties or yes they could garnish wages if they took it that far.  Very rarely does this ever happen because it costs the banks even more money to sue for a deficiency judgment and clearly they should know you don’t have any money, so they don’t even bother.  And if by some odd reason the bank did file for a deficiency judgment, most homeowner file for bankruptcy which wipes out the judgment altogether.  More than likely they will 1099 you for the amount they lost and write the loan off.

It’s not uncommon either for lenders before foreclosure and after foreclosure to put fear into homeowners minds telling them they will sue them or garnish wages or take assets if they don’t pay.  These are all scare tactics.  It’s there job to “scare” you so you’ll pay them as much as you can, even though clearly you can’t afford any payments to them.