I'm planning from walking from the property and know that the rules are changing for tax liability next year. I live in CA will I be responsible for the 1099 tax from the mortgage company for the difference that the house will be sold
As for the tax implications, you should consult a CPA or tax attorney. Although, you are correct that the tax code is in motion in that area and the answer could change. Please make sure your modification did not make you personally liable again. It shouldn't have although the devil is always in the details.
I'd almost guarantee that, by executing a loan modification on a piece of property included in a bankruptcy, you guaranteed to pay regardless of the discharge. I'd bet they will be looking to collect on the unpaid balance, and you will probably receive a 1099 for the "income" attributable to you.
We can be reached at 507.334.0155. Our web address is: www. corbin-law-office.com This answer is not to be considered a response to a specific legal issue in a specific jurisdiction - it is to be considered only a general response to a hypothetical scenario posed by the questioner. For specific legal advice, please consult with a licensed attorney in your jurisdiction.
HAMP directive 10-02 states "Borrowers who have received a Chapter 7 bankruptcy discharge in a case involving the first lien mortgage who did not reaffirm the mortgage debt under applicable law are eligible for HAMP. The following language must be inserted in Section 1 of the Home Affordable Modification Agreement:
“I was discharged in a Chapter 7 bankruptcy proceeding subsequent to the execution of the Loan Documents. Based on this representation, Lender agrees that I will not have personal liability on the debt pursuant to this Agreement.”
Look in section 1 of your modification agreement for this language. Unless your lender refinanced the loan, a modification would NOT resurrect a discharged debt. The 1099 income would be dealt with using form 982, and checking box 1a - debt discharged under title 11 (which is bankruptcy) and putting the amount in the box in line 2. You should review the issue with a tax adviser, because there may be other issues to consider.
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