Yes, 1099-C's should be included in a bankruptcy filing as unsecured debt. To be eligible for Chapter 13, your total unsecured debt cannot exceed $360,475.00.
The tax consequences of a 1099-C can be at least partially mitigated by filing IRS Form 982, here: http://www.irs.gov/pub/irs-pdf/f982.pdf. You would want to consult with a CPA or tax attorney as to which tax year(s) this Form should be filed for under your specific financial circumstances, as I am not a tax expert.
Please let me know if you have any additional questions. Thank you!
What would be the purpose of including the 1099-Cs since the filing of those will not make the bank release the mortgage. The debt has been cancelled and not including them on a replayment plan seems the right choice since payment is NOT expected ?
If the bankruptcy is filed after a 1099-C is received, then the debt will often be treated as income and not a dischargeable obligation. This should be contested, and Form 982 should be sent to the IRS indicating the bankruptcy filing. If you don't include the 1099-C as unsecured debt in your bankruptcy schedules, it's unlikely that the IRS would accept the fact that this is a dischargeable obligation and release you from tax liability.
For more detail on taxes in Chapter 13 Bankruptcy, please Nolo's concise summary of the relevant law here: http://www.nolo.com/legal-encyclopedia/tax-debt-chapter-13-bankruptcy.html
Q: "What would be the purpose of including the 1099-Cs since the filing of those will not make the bank release the mortgage. The debt has been cancelled and not including them on a repayment plan seems the right choice since payment is NOT expected?"
A: If you haven't already paid the income taxes on the amounts listed in these 1099-Cs, listing these debts as general unsecured claims (provided they meet the requirements in the link above) would usually be a very good idea. Although Chapter 13 Plans will vary greatly depending on your disposable income, in quick and dirty terms you're looking at paying something like 10-20% of your tax liability (for taxes that meet the Chapter 13 requirements for unsecured debt) versus paying 100% of your tax liability "outside" the Plan.
If the potential alternative to including these taxes in your bankruptcy is simply not to pay them (since you're presumably insolvent), consider the fact that the IRS will ultimately end up with a tax lien "upon all property and rights to property, whether real or personal, belong[ing] to such person." Once this tax debt becomes a tax lien, it would be classified as priority secured debt and would have to be repaid at 100% in any subsequent bankruptcy filing (i.e. for all intents and purposes, it will become a nondischargeable debt).
Additionally, in Ohio, if the mortgage for which the 1099-C was issued was foreclosed upon, the lender has two years from the date of the foreclosure sale to seek a deficiency judgment from you (i.e. the entire amount listed on the 1099-C) if this was a residential property with two or fewer units. The fact that the 1099-C was issued does NOT preclude the lender from seeking this deficiency judgment (provided they're not time-barred by the applicable statute of limitations). See Ohio Revised Code 2329.08.
If this mortgage was on commercial property, the applicable statute of limitations to collect on the deficiency may be as long as 15 years in Ohio (this statute of limitations was recently changed to 8 years in 2012, but it's not totally clear which statute of limitations would govern your situation).
The properties were never foreclosed upon, just written off. How would those be handled ?
Q: "The properties were never foreclosed upon, just written off. How would those be handled?"
A: All secured claims (mortgages, liens, and other security interests in real or personal property) should be listed in Schedule D.
It's highly unusual (and probably not the best practice from a creditor's perspective) for a lender to issue a 1099-C before the property is actually foreclosed and sold for an amount less than the outstanding mortgage balance. Depending on what you want to do with these properties, these 1099-Cs may actually be helpful for someone in your circumstances. As a hypothetical, let's say you want to keep one of the investment or rental properties you own (not including your personal residence). Assume that the outstanding mortgage balance on this property is $200,000, and the lender filed a 1099-C on this property for $50,000. That 1099-C could potentially be used in bankruptcy court as an admission by the lender that the property is only worth $150,000 ($200,000 - the $50,000 "written off"), and you could possibly cram down the mortgage to a total of $150,000 (provided you can pay off the entire $150,000 through your Chapter 13 Plan).
Regardless of what you ultimately decide to do with these properties, your case is going to be at least somewhat complex due to the debt limit issue and tax issues involved. This is not a case you want to handle pro se; I would strongly suggest you hire a local attorney to assist you with your case.
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