Foreclosure University

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Deficiency Judgment / 1099

What determines whether I receive a 1099-C or a deficiency judgment for the bank’s loss?

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Question: If a non-primary residence in NY goes into foreclosure, what determines whether I receive a 1099-C or a deficiency judgment for the bank’s loss?

Answer: -A lot of times it just depends on the lender and the amount that’s deficient.  You really don’t have any control when your property forecloses.  If they believe you have some assets, they may file a judgment against you.

However, when you negotiate the short sale with the lender,  you can actually control what happens to the homeowner.  If you ask for a satisfaction which means “paid in full”, the lender gives up their rights to come after the borrower for a deficiency judgment which is really what you should be concerned about. They can still and most likely will issue the 1099-c for the homeowner. However, for most homeowners, form 982 will counteract that 1099. Just talk to your accountant about it.

 

Summons in Arizona for a piece of property that was foreclosed on…now suing for deficient amount.

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Question: Just got summons in Arizona for a piece of property that was foreclosed on and sold. The bank is suing us for the deficiency amount. Is there any way to fight this? We think we may have a defense because there was no public report for this property at time of sale.

Answer: – Yes, the bank does have the right to go after the homeowner for the deficient amount after the home has been through foreclosure.

Rental property in WA and am in military in NC presently.

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Question:  I have property in WA, currently it is a rental property since I am in the military and am in NC presently. Being that I cannot come close to renting the house for what I pay in mortgage, I am facing letting the house go. Trying to find out all the ramifications of foreclosure.

Answer:  – Well, the bank will either 1099 you for the difference if they are not able to collect what is owed, or they will file a deficiency judgment against you for the amount they lost. Ideally, you are hoping for a 1099-c because in most cases you can counteract the 1099-c if it’s your primary residence or you are insolvent.

My home in South Carolina is facing foreclosure, can they garnish my wages?

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Question: My home in South Carolina is facing foreclosure, I live and work in Fl now. If my home forecloses and they file a deficiency judgment, if I don’t have the money, can they garnish my wages?

Answer: – If your home in South Carolina forecloses and they file a judgment against you, yes they can garnish wages.

FILING BANKRUPTCY TO PROTECT FROM DEFICIENCY JUDGMENT

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Question: CAN FILING BANKRUPTCY PROTECT YOU FROM A DEFICIENCY JUDGMENT?

Answer: -YES…  for most people who go through a hardship like foreclosure, the main reason they file bankruptcy is because a judgment was filed against them. And since they are not in a position to pay off their mortgage amounts, bankruptcy was their only option unless they wanted their wages garnished. Bankruptcy can protect you from a deficiency judgment and that deficient mortgage amount would be included in the bankruptcy.

On a side note, most people do wait to file bankruptcy until after foreclosure because lenders don’t necessarily have to file a judgment against the homeowner. They can issue a 1099 which means the mortgage amount they forgave is considered as taxable income and they give up their rights to come after you for the deficient amount. I would recommend you seek counsel from a professional bankruptcy attorney so you know all your options. Good Luck