I am not sure that the person you spoke to at the IRS had their facts straight. A 1099-C is filed when the lender does not feel the chances of collecting the debt are good. It does not release the debt.
The bank failed to foreclose in state court. Since they failed to foreclose and the judgment the bank was seeking was $23,245.01 which was the exact same amount that was cancelled, there can be NO lien. A lien means there is a debt and there is no debt since the bank failed to foreclose and then issued a 1099-C.
That being said you bring up an interesting point if there are no mortgage liens recorded against the property their are no liens. I think what you are actually saying is that there is a lien but in your opinion it should be released because the lender filed a 1099-C and that is not correct.
This is one of the most confusing areas of law as most people see this as a discharge of a debt that should remove the mortgage lien.
Let me see if I can assist with making sense of this seemingly nonsense.
"IRS Encourages Filing
A financial institution is required to send out the 1099-C upon the happening of certain “identifiable events”. Some identifiable events like a “discharge of indebtedness under title 11 of the United States Code” will have a clear date. One of the “identifiable events” is a little vague:
A discharge of indebtedness pursuant to a decision by the creditor, or the application of a defined policy of the creditor, to discontinue collection activity and discharge debt.
This is where things get a little sticky. If the owner of the indebtedness has decided that you are not worth chasing currently, but may be in the future, should you be issued a 1099-C ?
The Internal Revenue Service does not view a Form 1099-C as an admission by the creditor that it has discharged the debt and can no longer pursue collection. Section 1.6050P-1(a) of the regulations provides that, solely for purposes of reporting cancellation of indebtedness, a discharge of indebtedness is deemed to occur when an identifiable event occurs whether or not an actual discharge of indebtedness has occurred on or before the date of the identifiable event"
In plain English a 1099-C in and of itself does not mean that they must release the lien/judgment. If you can get them to say, in writing, that the debt has been satisfied then you can get the lien released.
“The courts have held that a “Form 1099-C” is not an admission by the creditor that it has discharged the debt or can no longer pursue collection.
Pursuant the IRS regulations, there are 8 identifiable events which require the creditor to file a 1099-C: (1) a discharge of indebtedness in bankruptcy (2) a cancellation or extinguishment of an indebtedness in a receivership, foreclosure or similar proceeding (3) a cancellation or extinguishment of debt upon the expiration of the statute of limitation (4) a cancellation or extinguishment pursuant to an election of remedies (5) a cancellation or extinguishment of debt where debt unenforceable pursuant to probate or similar proceeding; (6) a discharge of ndebtedness pursuant to agreement between the creditor and debtor for less than full consideration; (7) a discharge of indebtedness pursuant to a decision by the creditor to discontinue collection activity and (8) the expiration of the nonpayment testing period…
This means that unless you have received something from the creditor stating that the deb tis forgiven in addition to the 1099-C, they still have a right to collect on it unless one of the above exceptions applies. ..
So what should you do? If you have received a 1099-C from a lender, especially a lender with a lien against your home, you should call the lender and see if they have actually “forgiven” the debt. If they have, you need something in writing that says exactly that i.e. the creditor is not going to pursue any further collection on the debt…If the lender will not issue you a letter saying that the debt has been forgiven, you need to seek legal counsel immediately. A 1099-C without further evidence stating the debt was forgiven is a ticking time bomb.”http://www.grimesbklaw.com/articles/2015/2/12/1099-c-cancellation-of-debt.html
Which State is the property located in?
Have you requested a satisfaction of lien?