Bankruptcy Law Questions? Ask a Bankruptcy Lawyer Now.
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If you file a Bankruptcy, you will not have to include as income the 1099-C amount that was forgiven because of the short sale.
The liability for that tax will not be discharged - it will be deemed to not exist at all.
Whether or not you would have to give up your home if you file a Bankruptcy will depend on whether you have lived in Ohio continuously for the past 2 years, and the home's equity. (Equity = current market value minus the balance of any mortgage(s).)
Whether or not you will have to give up your home would not depend on how much debt you have.
Is this what you wanted to know?
I have lived in Ohio my whole life, and the issue with the home is that the assets I have in my home is more than the debt I owe, or would owe if i have to include to 1099C, or close to it. I was told since there is that amount in the home they woiuld order the home sold to pay the debts, or make me file the bankruptcy that had me repaying the debts over 5 years. It is the debt that would be on the home that is going for short sale that is going to cause me the greatest deal of debt. If I understand you correctly, if I file bankruptcy, then basicly I would not get a 1099C on the house. So basicly, no tax existed. Is this true of all the bankruptcy options, or only total?
Thank you for your response.
In your last sentence, what did you mean by, "...or only the total''?
If I understand you correctly, if I file bankruptcy, I dont include the 1099-C in the equation? If that is correct then my debts owed are about $40,000, my assets in the home, is about $50,000. I am on disability income. I was told I can not file total bankruptcy, chapter 7, but would have to file chapter 13 and repay the debts over time, or sale the house to pay the debts.
My understanding of my situation is this then,
I can sale my home as a short sale, but NOT if I file bankruptcy. So would have to sale first then file. I dont have to claim the 1099-C on taxes as long as I file for bankruptcy THIS YEAR, before I file my income taxes, if I file my taxes for this year, then file bankruptcy the 1099-C will be applied to my taxes for NEXT year.