Do you know about deficiency judgement and 1099 ? i know deficiency judgement is issue when a bank wants the difference between mortgage and the discount amount but do the seller have to pay the judgement right away and do they have to pay it in full?
i understand 1099 is issue when the bank forgive the debtor the difference but exactly what is a 1099… for ex: owe= 100,000 , discount= 60,000 , difference= 40,000. does the seller have to pay the 40,000 to IRS or just the taxes on the 40,000 ?
Howdy Focusonmoney:
If banks ever do go after a judgement it is just like any other debt. It will be unsecured debt unless you have other real estate that can be taken and sold to satisfy the debt like most other judgements can do also. Most banks are not this aggressive.
The 1099 is just a form sent to the IRS and you showing the debt relief, You can dispute this with the bank too if you feel there may have been an error. This usually means that the property sold for less than the loan amount the the bank wrote off the balance or foregave it. As far as what tax will be due, it should be reported with the other income that you receive. Your tax bracket and other income or losses will all be taken into consideration. You should talk to an accountant to get more details etc
Shorts sale sellers could also be hit with a 1099 in your example for $40,000 where they would pay the income tax on the $40,000 unless they had losses to offset the income.
thanks so much for your reply now i understand it clearly… 