Comments for The ZipDebt Blog

Comment on Debt Settlement, Insolvency, & Income Taxes by Charles

Charles — Tue, 21 Feb 2012 16:44:15 +0000

Hassan, my understanding is that any lien would still be considered as a debt and would therefore reduce the FMV of the home. You send Form 982 only, but should be prepared to provide documentation proving how you arrived at the FMV for the property, in case the IRS requests it from you.

Comment on Debt Settlement, Insolvency, & Income Taxes by hassan

hassan — Sat, 18 Feb 2012 21:09:06 +0000

Quick questions. Is a lean on a house considered a debt and does that change the FMV? Also, do you send the IRS documentation of the FMV of the house of the year they are questioning?

Comment on Debt Settlement, Insolvency, & Income Taxes by Charles

Charles — Wed, 15 Feb 2012 18:10:21 +0000

Donna, I’m not quite sure I understand your question. The 401(k) is counted like any other asset that you own, and becomes part of the net worth calculation for determining insolvency. So it’s not correct to say that a 401(k) is “listed but then it doesn’t count.” Now, that said, be sure that you are correctly calculating net worth. I’m assuming that any 1099-C associated with the property you lived in is already exempt under the Mortgage Debt Forgiveness Act, so it must be the rental property that is causing the problem. For that property, take the full value of what you owed on the mortgage(s) before losing the home to foreclosure, and then subtract the fair market value of the property at that time. If the property was upside down by more than you own in assets (including retirement funds), then you are insolvent to that extent.

Comment on Debt Settlement, Insolvency, & Income Taxes by DONNA

DONNA — Wed, 15 Feb 2012 16:10:22 +0000

Charles, this is a great blog thanks for helping all of us in trouble with this massive problem. My question: I was forclosed on with two houses in California. One I lived in and one my son lived in , now my 1099 I had to treat my sons house as a rental. Because of my 401K it does not look like I will be able to file insolvancy. I don’t understand how this has to be listed but then it doesn’t count. Can you please explain. If it were not for that I would be insolvant I think. This is so confusing.

Comment on Settlement of Second Mortgages and HELOCs by Charles

Charles — Mon, 13 Feb 2012 17:56:45 +0000

Andrea, yes, a lender has the legal right to foreclose on a property when you fall behind, and that is true for second mortgages as well as first mortgages. We usually don’t see the banks moving to foreclose on the basis of a second mortgage being in default unless the home is worth more than is owed on the first mortgage. That leaves partial equity against the second mortgage that can be recovered via foreclosure.

Comment on Settlement of Second Mortgages and HELOCs by Andrea

Andrea — Mon, 13 Feb 2012 16:50:20 +0000

Can BOA foreclose on my home since my HELOC is 4 months past due? I just received a letter that they were referring my account for foreclosure. Please advise. Thanks

Comment on Why I Recommend Against Sending Cease Communication Letters to Creditors by Charles

Charles — Mon, 06 Feb 2012 16:28:16 +0000

Cindy, based on the situation you are describing, I strongly recommend that you at least have a *consultation* with a couple of local bankruptcy attorneys. If you have depleted all your resources, then debt settlement simply won’t work for you. As you fall behind, there is no question that the collectors will track down your husband’s work number and start trying to call him there. If you send cease communication notices, that will only make the situation worse, since creditors often react by moving faster to litigation than they would otherwise. But even if you don’t send such notices, some of the creditors will eventually escalate these accounts and you’ll face legal actions. If they get judgments against you, that can lead to wage garnishment, property liens, or levies on your bank accounts. All of that is worse than filing a bankruptcy! Please, go get some legal help before things get out of control on you, ok?

Comment on Why I Recommend Against Sending Cease Communication Letters to Creditors by cindy

cindy — Sat, 04 Feb 2012 16:09:13 +0000

We have fallen behind in our credit cards, due to medical issues and out of work. We intend to pay these bills, “some day”, but we just don’t have the money right now and have no way of getting any. We have gone through all of our savings, and retirement accounts. My husband cannot receive calls at work about this. We are trying to not file for bankruptcy. Can you tell us what steps to take.

Comment on Debt Settlement, Insolvency, & Income Taxes by Charles

Charles — Fri, 03 Feb 2012 16:35:26 +0000

Dee, as far as I know, it should be one or the other. The same canceled debt should not have to be counted as income on your return and also your son’s return. It would appear that one of the 1099-Cs was issued in error by the lender. But I am not exactly sure what would be the best way to handle this situation, so I recommend you contact the IRS help line for input.

Comment on Debt Settlement, Insolvency, & Income Taxes by Dee

Dee — Fri, 03 Feb 2012 02:05:42 +0000

I received a 1099c for a student loan I co-signed for with my son. He received one as well. He received the funds, do we both have to claim this as income?