Leftover Foreclosure Debt
There may be leftover foreclosure debt if you borrow money from a commercial lender and the lender later cancels or forgives the debt. The IRS can tax you on the amount of debt that was forgiven. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.
That’s interesting, isn’t it? If you can’t pay your debt, and aren’t required to…it can count as “income” that must be taxed.
Lenders are filing new motions in old foreclosure lawsuits and hiring debt collectors to pursue leftover debt, plus court fees, attorneys’ fees and tens of thousands in interest that had been accruing for years.
It’s an aftershock of the foreclosure crisis, and most homeowners don’t know it’s coming.
That would seem really scary…especially with the interest accruing.
There is some good news, however. The recent trend is for lenders to waive the chance to sue later for the “deficiency balance.” That is called a “deficiency release” and averages over $80,000.
And then if you can convince your lender to let you sell for less, there might be some relief.
Phone Axsmith Law LLC to discuss alternatives to foreclosure at (202) 285-5415.