I had a Townhouse a few years ago that I needed to sell. It had a secured mortgage and a 2nd, no interest mortgage to do away with the need for mortgage ins. My life situation changed, and I wanted to sell. Had a realtor and put it up for sale.The R.E. market was just starting to slide. Couldn't sell. Lowered the price-still couldn't. Asked my realtor for advice as I was paying for two places. He said let's go short sell. The banks were flooded by this time with foreclosures and short sales. The no int. loan co. said yes-the larger, secured dragged their feet (understaffed to handle the sudden demand they said). Three times I faxed in all the paperwork-no response. Stopped paying-foreclosure notice, then foreclosure. The secured co. kept the money-the unsecured 1099'd me and I claimed that as income on my fed./state taxes. Then out of the blue I start getting phone calls from LCS who said they "bought" the outstanding loans from the unsecured co. and I owed the money. If I already claimed the money as income-how can I now be forced to pay it back? Isn't that some sort of double jeopardy as there is in criminal cases? What recourse do I have.
State/Country relating to question: Minnesota
Good evening. You do not owe this. A collection agency can only step into whatever claim the lender had. Because the lender issued you a 1099 that indicated they forgave the loan rather than simply writing it off. As a result, the collection agency cannot then sue on a note that has been forgiven. But, this is typical collection agency behavior .... fortunately there is legislation to protect you and penalize them. Here's what you do:
Send them a certified, return receipt requested letter explaining that this note was forgiven, you were issued a 1099, you do not owe it, and demand they immediately cease and desist all further efforts to contact you and/or to collect this debt. Inform them that any efforts to do otherwise will constitute a violation of the Fair Debt Collection Practices Act and that you will report each and every violation to the Federal Trade Commission. Each violation carries at least a $1,000 fine, so that should be the end of things for you.
I hope this has given you the guidance you were seeking. I wish you the best of luck!
If you have a follow-up question, please remember that there might be a delay between your follow up questions and my answers because I may be helping other clients or taking a break.
If I have adequately answered your question, even though the answer might not have been the one for which you hoped, I would appreciate it if you would please click the GREEN ACCEPT button so that I receive credit for my work; otherwise, though you have made a deposit, I do not receive credit.
If you need additional clarification on this question after clicking ACCEPT, please do not hesitate to click Reply and I will be happy to do what I can to help you further. Thanks for allowing me to be of service to you.
The information given her is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.
Texas lawyer for 32 years; Also RE developer
DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.
The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).