1099-C from 2nd Mortgage

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LoanSafe Member
Jun 4, 2012
In Spring 2010 I had some rental properties which were foreclosed in IL (10yr SOL). They were 100% financed. The 80% loans sent me a 1099-C and I was insolvent at the time so it was resolved. I followed Tom Easons advice in the SOJL thread and completely ignored the 20% 2nd loans. These were sold off to a variety of Debt Collectors who have sent letters trying to settle, but I have taken no action/communication.

Fast forward to now and I received a 1099-C from a debt collector for 2019 tax year for the full loan balance on the last statement I received from the original servicer of the loan. I have no idea whether the debt collector owns this debt or can validate that they do. I've been speaking with my CPA on how to approach. My thought is to request that the debt collector validate that they infact do own the debt and if no response is provided file a dispute form with the IRS? I'm not sure if this will waken up the debt collector to restart collection efforts or not. Also, can I receive a cancellation of debt without any settlement letter?

Erik Sandstrom

Mortgage Expert - Call 1-619-379-8999
Staff member
Loan Safe Mortgage
Jan 14, 2011
San Diego, California
I have seen 2nd liens do 1099-C's more often than not but the tricky part is they still somehow retain a lien against the property even after filing the cancellation of debt. From a loan perspective, usually we still need to pay these guys off.

I think you're taking the right measures with making them validate that the own the debt. To answer your other question about receiving the 1099-C without a settlement letter, yes you can I have seen that from some of our members in the past.