How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Fritz Your Own Question

Fritz
Fritz, Attorney
Category: Bankruptcy Law
Satisfied Customers: 302
Experience:  Florida attorney with extensive experience in Chapter 7 and Chapter 13 consumer bankruptcy cases
Type Your Bankruptcy Law Question Here...
Fritz is online now
A new question is answered every 9 seconds

I have mortgage which have been written off and I have received

Resolved Question:

I have mortgage which have been written off and I have received 1099-C's, should these be included in a Chapter 13 and why ?
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  Fritz replied 1 year ago.

Fritz :

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.

Fritz :

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.

Fritz :

Please let me know if you have any additional questions. Thank you!

Expert:  Fritz replied 1 year ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

What happens now?

If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Customer: replied 1 year ago.

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 ?

Expert:  Fritz replied 1 year ago.

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

Expert:  Fritz replied 1 year ago.

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).

Expert:  Fritz replied 1 year ago.

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).

Customer: replied 1 year ago.

The properties were never foreclosed upon, just written off. How would those be handled ?

Expert:  Fritz replied 1 year ago.

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.

 

 

Fritz, Attorney
Category: Bankruptcy Law
Satisfied Customers: 302
Experience: Florida attorney with extensive experience in Chapter 7 and Chapter 13 consumer bankruptcy cases
Fritz and other Bankruptcy Law Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises! Gary B. Edmond, OK
< Last | Next >
  • Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises! Gary B. Edmond, OK
  • My Expert was fast and seemed to have the answer to my taser question at the tips of her fingers. Communication was excellent. I left feeling confident in her answer. Eric Redwood City, CA
  • I am very pleased with JustAnswer as a place to go for divorce or criminal law knowledge and insight. Michael Wichita, KS
  • PaulMJD helped me with questions I had regarding an urgent legal matter. His answers were excellent. Three H. Houston, TX
  • Anne was extremely helpful. Her information put me in the right direction for action that kept me legal, possible saving me a ton of money in the future. Thank you again, Anne!! Elaine Atlanta, GA
  • It worked great. I had the facts and I presented them to my ex-landlord and she folded and returned my deposit. The 50 bucks I spent with you solved my problem. Tony Apopka, FL
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
 
 
 

Meet The Experts:

 
 
 
  • FiveStarLaw

    Attorney

    Satisfied Customers:

    3203
    Bankruptcy Lawyer. Experienced.
< Last | Next >
  • http://ww2.justanswer.com/uploads/FL/FLAandNYLawyer/2012-1-27_14349_3Fotolia25855429M.64x64.jpg FiveStarLaw's Avatar

    FiveStarLaw

    Attorney

    Satisfied Customers:

    3203
    Bankruptcy Lawyer. Experienced.
  • http://ww2.justanswer.com/uploads/TL/tleeders/2012-6-13_204815_TSL1.64x64.jpg Terry L.'s Avatar

    Terry L.

    Attorney

    Satisfied Customers:

    2204
    Better Business Bur 15yrs bankruptcy experience. Chicago Bar
  • http://ww2.justanswer.com/uploads/mnphillips2/2009-03-13_203105_10984459-249293407.jpeg Phillips Esq.'s Avatar

    Phillips Esq.

    Attorney-at-Law

    Satisfied Customers:

    950
    B.A.; M.B.A.; J.D.
  • http://ww2.justanswer.com/uploads/CO/cortrightlaw/2011-12-5_4117_Kevin.64x64.JPG cortrightlaw's Avatar

    cortrightlaw

    Attorney

    Satisfied Customers:

    490
    Attorney practicing Bankruptcy Law including Chapter 7, Chapter 11, Chapter 12, and Chapter 13.
  • http://ww2.justanswer.com/uploads/Jay1968/2006-12-03_004423_JoeRossPhoto.jpg JoeLawyer's Avatar

    JoeLawyer

    Attorney

    Satisfied Customers:

    376
    Attorney in the practice of Bankruptcy Law since 1996
  • http://ww2.justanswer.com/uploads/DY/Dylatess/2012-9-11_1968_BHBTemplePhoto.64x64.jpg dylatess's Avatar

    dylatess

    Attorney

    Satisfied Customers:

    370
    35 plus years of experience specializing in bankruptcy law
  • http://ww2.justanswer.com/uploads/US/USLawAnswers/2012-9-20_23143_20090105211638Headshot3b.64x64.jpg Brent Blanchard's Avatar

    Brent Blanchard

    Bankruptcy Attorney

    Satisfied Customers:

    315
    Twelve years experience in all aspects of debtor & creditor BK.