Bankruptcy Court Finds IRS Form 1099-C Does Not Prevent Collection of Debt, Las Vegas, Henderson Nevada

By Black & Lobello “Robert Noggle”

A bankruptcy court in Pennsylvania recently ruled on an issue that has been a frequent source of confusion to those working with short sales. 

The issue is whether a 1099-C issued by a lender to a borrower automatically relieves the borrower of liability for the debt.  In other words, is a creditor prevented from pursuing collection of a debt for which it has issued a 1099-C pursuant to IRS requirements?

A 1099-C is issued to the borrower by the lender for “cancelled” debt.  This debt generally is taxable income to the borrower.  The exceptions to this have been covered extensively in other articles including that for purchase money debt on a primary residence. By Robert Noggle Black & Lobello Law.

In the case of In re Zilka (407 B.R. 684) the court considered this issue in a situation that did not involve a short sale. Nonetheless, the case is illustrative of what may happen when a court considers the issue in a short sale context. The judge wrote:

[The creditor's] issuance of the Forms 1099-C did not itself operate to  legally discharge the Debtor from further liability on each of the [creditor's] four claims. That is because Forms 1009-C, as a matter of    law, do not …Read More CLICK HERE http://www.vegasshortsalehomes.com/841134/2010/01/02/Bankruptcy-Court-Finds-IRS-Form-1099-C-Does-Not-Prevent-Collection-of-Debt-Las-Vegas-Henderson-Nevada.aspx

To Sell a Las Vegas Home 702-307-4070 ext 107 Steve Wadkins www.VegasShortSaleHomes.com

To Buy a Las Vegas Home 702-307-4070 ext 106 Gerri Wadkins www.WadkinsHomeTeam.com