Home Loans and Support

Does a 1099-C mean the debt is discharged and can no longer be collected?

Discussion in 'Short Sale Outpost' started by oc949, Nov 24, 2009.

  1. oc949

    oc949 LoanSafe Member

    My followng question is NOT about deficiency judgments, but is about collections practices on forgiven debt arising from a short sale.

    I am short selling my house and the bank says they will issue a 1099-C (Cancellation of Debt) form to me after the short sale is complete. In addition the bank says they will report on my credit that the loan was "settled paid less than full".

    Since they are issuing me this 1099-C form, does this mean that they are discharging the debt? Does this forgiveness of debt mean that the issue of debt collection is closed once and for all? I don't see that my debt was "satisfied" only that it was "settled".

    If they issue a 1099-C form it means that they are forgiving debt; writing off the amount on their taxes; then sending me a form that tells the IRS how much debt was forgiven.

    Does this mean there will be no further collections on the debt?

    (By the way, I have a non-recourse loan in a non-recourse state, California, so my question is NOT about deficiency judgments).
  2. ToughSpot

    ToughSpot LoanSafe Member

    Hey oc949, yes that should mean you are in the clear. They can't both 1099 you and try to collect the debt. That being said, doesn't mean that somewhat at the lender's office doesn't screw up and try to sell it to a third party collection agency. But as long as you have the 1099 in hand for the full amount of the deficiency, any lawyer should be able to make the collection agency go away with a letter.

    I'm in the same boat. I'm hoping to get a 1099 in January so I can finally sleep nights.
  3. Woody

    Woody LoanSafe Member

    OC949...I agree with Toughspot. That 1099 will clear you of any debts, so you won't have to pay. If there's a problem, a laywer will be able to clear it up.
  4. Goodtimes

    Goodtimes LoanSafe Member

    Hi Everyone,

    I am in the same spot today....Have you had any issues since your short sales?

    I hope not! For your case and mine!!

  5. voodoocar

    voodoocar LoanSafe Member


    I had a 1099-C on my short sale and no one has ever tried to collect on it! ($200k)

    I have a 1099-C for half my loan from BOA on a SBA business loan but its strange how the SBA wants 100% payment when the bank I borrowed from (BOA) issued a 1099-C for half the loan (DEBT FORGIVENESS) and the treasury dept now has about 70% payment on the loan from my personal tax return and they want the other 30% now. I filed a dispute and they say it is up to the SBA. I called the SBA and they tell me that the 1099-C is a mere formality used by the bank to get the 50% of the loan off their books (the other 50%) was paid off by the SBA. I even spoke with a women who was suppose to be a lawyer. She told me the same thing.

    Of course I have to pay taxes on the 1099-C

    So why does the SBA think they can get away with this. Can you say CLASS ACTION LAW SUIT? I just need to figure out who can handle this for me!

Share This Page



"Hello Moe, I just wanted to tell you, your website has saved my life (literally), I stumbled on your site in the middle of losing my home, I was able to network with people going through the same thing as I am. I didn't feel alone anymore, I have tried to give back and counsel those that haven't walked in my shoes yet. We hear so much about what is wrong with America, I just wanted you to know, you are whats "right" with America."

Nina Mitchell
Loansafe & MoeSeo Inc. © 2014 | LoanSafe.org is not a bank, lender, mortgage broker, law firm or affiliated with the US Government. Privacy Policy