Mortgage Debt Relief Act of 2007: If Wells Fargo reported both amounts of the 80/20 loan (123,500 was FMV/sale price and I purchased for 280,000) on a 1099-A does that mean they can't pursue legal action as they have already "forgiven" the debt? Are these two seperate issues? I recieved a1099-A for both amounts in 2008 and filed insolvent that year on my tax return. Seems like double Jeopardy if they report it as income on taxes then sue for the whole amount plus interest later. I appreciate the help with this situation as it seems too late in the game for settlement but too early to try can clear up the credit report as it seems they still have time to seek legal action.
A 1099-A is not a write-off of debt. A 1099-A is the lender reporting to the IRS that you have abandoned the property, done a deed-in-lieu of the property, or short-sold the property and that the lender is subtracting the amount of the home price or value from their loan and that they still consider the deficiency an asset.
A 1099-C is what you're thinking about, which is a forgiveness of the debt and expensing the loss over to you. If they issued you a 1099-A, then they can still sue. If they issue you a 1099-C then they're done with you.