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Ross, Home Seller in Terrell Heights, San...

I filed backruptcy with my house included. Will a short sale pentalized me, by the IRS with a 1099c? Can this help my credit score now?

Asked by Ross, Terrell Heights, San Antonio, TX Fri Jun 24, 2011

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Hi Ross,

You need to forget about your credit score right now. The BK just killed it. A short sale alone is NOT a big hit on credit, it's the missed payments that hurt the most, second to the BK.

Regarding the 1099c: If you're going to short sale an investment property (you never lived there or did not own & occupy this house for 2 out of the last 5yrs) you will get a 1099c that you will have to pay the IRS on,,based on the negative amount times your tax rate.

I suggest speaking to a CPA, even if this is an investment property you may be able to still file IRS form 987 & try to prove your insolvency (inability to pay).

If this is your Primary Residence & the bank issues you a 1099c, this is actually a GOOD thing, because the bank CANNOT issue the 1099c AND give you a deficiency judgment in the future. If this is your Primary Residence & you receive the 1099c, go to the CPA file form 987 on your 2011 tax returns & you DO qualify under the Mortgage Debt Forgiveness Act of 2007 & you do NOT have to pay any extra income tax to the IRS.

EmilyKnell1@yahoo.com
562-430-3053 c
Realtor Since 1996
Main Street Realtors
Short Sale Expert
1 vote Thank Flag Link Fri Jun 24, 2011
If you included the house in the bankruptcy that should wipe out the tax as well, you should talk to your attorney about that. The only reason to do a short sale after bankruptcy is to stay in the property longer after the discharge.
0 votes Thank Flag Link Tue Nov 15, 2011
I'm unclear on some of your statements. You say the house was included in the bankruptcy. Did you hand over your deed to the bank? Was the unpaid balance of your mortgage discharged? If you want to do a short sale, then I have to assume you did not hand over the deed. You should speak to a CPA regarding tax liabilities. There are several circumstances and exemptions on short sales where you may not have to pay taxes. Since you already have a bankruptcy on your credit, now is a good time to do a short sale. A short sale will keep foreclosure off your credit.

Feel free to call me anytime to discuss your specific situation. We have closed short sales post bankruptcy.

Eli Givoni, Director
Short Sale Department, LLC
561-361-1909
info@shortsaledept.com
http://www.shortsaledepartment.com
Serving all 50 states

MARS Disclosure for General Commercial Communications
IMPORTANT NOTICE:
Short Sale Department, LLC is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.
0 votes Thank Flag Link Fri Jun 24, 2011
Your credit score will be effected by a variety of items. The BK and missed mortgage payments don't help. But avoiding a foreclosure on your record should be beneficial.
I don't know why the IRS would look at debt forgiveness from a short sale any differently than from a foreclosure. But you would want to ask your attorney or CPA to councel you on that.
0 votes Thank Flag Link Fri Jun 24, 2011
In short - no. Under the Mortgage Forgiveness Debt Relief Act, you may be able to exclude up to $2 million in debt forgiven from non-payment of the balance of a mortgage balance on your principal residence. The debt forgiveness applies to calendar years 2007 - 2012.

For more information, see the IRS webpage at http://www.irs.gov/individuals/article/0,,id=179414,00.html.

You may also wish to consult with an attorney to ensure you're protected.
0 votes Thank Flag Link Fri Jun 24, 2011
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