Question: I had a short sale on a property in 2010 and I have a second home equity line that was not paid off. they say I owe the full amount. Can I declare insolvency and not have to pay ?
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If they issued you a 1099c, then you’ll need to talk to your accountant. Most of the time you can claim insolvency so you won’t have to pay taxes on the amount that was written off. If it was your personal residence, you may be eligible to not pay taxes based on the Mortgage Forgiveness Debt Relief Act. You can see if you qualify by going to IRS.GOV and searching for Mortgage Forgiveness Debt Relief Act.