Can we be liable for a deficiency judgment? 17 Answers as of May 06, 2011

My husband and I filed for chapter 7 bankruptcy two years ago. We decided to keep our home (did not reaffirm) but have stopped paying on it since October and now in the process of foreclosure. Can the bank come after us with a deficiency judgment, or send us a 1099 for the difference once the foreclosure is final?

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Indianapolis Bankruptcy Law Office of Eric C. Lewis
Indianapolis Bankruptcy Law Office of Eric C. Lewis | Eric Lewis
No, there is no deficiency or 1099 on a debt discharged in bankruptcy (no reaffirmation).
Answer Applies to: Indiana
Replied: 5/6/2011
The Law Office of Mark J. Markus
The Law Office of Mark J. Markus | Mark Markus
No. If you did not reaffirm the debt and did not subsequently refinance, then the debt was discharged and they have no further recourse against you. They MAY file a 1099, but you do not have to include it in your income. You should file IRS Form 982 for any debts discharged in your bankruptcy case. See your accountant about that.
Answer Applies to: California
Replied: 5/5/2011
Mercado & Hartung, PLLC
Mercado & Hartung, PLLC | Christopher J. Mercado
It depends on what state you are living in. WA is a deed of trust state and deficiency judgments are generally not obtainable.
Answer Applies to: Washington
Replied: 5/5/2011
Benson Law Firm
Benson Law Firm | David Benson
Generally speaking, if the debt was discharged in bankruptcy, there will likely be no deficiency in foreclosure. As to debt forgiveness, a bankruptcy discharge is most often a nontaxable event.
Answer Applies to: Ohio
Replied: 5/5/2011
Janet A. Lawson Bankruptcy Attorney
Janet A. Lawson Bankruptcy Attorney | Janet Lawson
No. There will be no deficiency judgment, and they should not send you a 1099C. If they do you can clear the matter up with the IRS.
Answer Applies to: California
Replied: 5/5/2011
    Dearbonn Law Offices
    Dearbonn Law Offices | Ajibola Oluyemisi Oladapo
    If your house goes into foreclosure and its sold, the proceeds of the sale will be used to pay off your debts. If there are still any debts owing and due, the bank may come after you with a deficiency judgment or 1099 to pay the difference. This almost always happens if you have a second mortgage on the house. You may be able to avoid this by negotiating a *short sale* with the bank. It up to the bank to determine if you qualify for a short sale. in that way, you will not have to pay any difference. Usually, lenders of first and only loans do not come after borrowers for the difference once a house goes into foreclosure and its eventually sold by them. Hope this helps.
    Answer Applies to: Washington
    Replied: 5/5/2011
    Burnham & Associates
    Burnham & Associates | Stephanie K. Burnham
    If you did not reaffirm the debt, your obligations under the debt were discharged with your Chapter 7 Bankruptcy. Even if they issue you a 1099 you will likely not have to pay taxes.
    Answer Applies to: New Hampshire
    Replied: 5/5/2011
    The Law Offices of Alan M. Laskin
    The Law Offices of Alan M. Laskin | Jared B. Gaynor
    As long as you have not signed any documents (loan modifications, etc.), the in personam debt to you for the mortgage is still discharged in the BK, and there should be neither personal nor tax liability on any default.
    Answer Applies to: California
    Replied: 5/5/2011
    Ferguson & Ferguson
    Ferguson & Ferguson | Randy W. Ferguson
    Only your attorney can answer questions about a bankruptcy you have filed.
    Answer Applies to: Alabama
    Replied: 5/4/2011
    Bankruptcy Law Office of Robert Weed
    Bankruptcy Law Office of Robert Weed | Robert Weed
    No, they can't. The bankruptcy still protects you.
    Answer Applies to: Virginia
    Replied: 5/4/2011
    Bankruptcy Law office of Bill Rubendall
    Bankruptcy Law office of Bill Rubendall | William M. Rubendall
    When you receive a discharge you no longer have personal liability for a deficiency and there is not a tax event upon a foreclosure being completed.
    Answer Applies to: California
    Replied: 5/4/2011
    Ursula G. Barrios Law
    Ursula G. Barrios Law | Guillermo Machado
    They can issue a 1099 but there will be no deficiency since you filed BK against them and did not reaffirm.
    Answer Applies to: California
    Replied: 5/4/2011
    Carballo Law Offices
    Carballo Law Offices | Tony E. Carballo
    If only one mortgage then no deficiency judgment possible in California if the bank sells the house at a trustee's sale. If more than one mortgage, then the second may sue you in some cases since after the foreclosure the second mortgage becomes just an unsecured personal loan. The 1099-C issue is a tax issue and not a bankruptcy issue although any bankruptcy case (Title 11 cases including Chapters 7, 11, 12 and 13) eliminates liability on a 1099-C (cancellation of debt income). There are other ways to eliminate cancellation of debt taxable income (reported on a 1099-C) such as insolvency and if it is your home that was foreclosed (up to a limit). See IRS Form 982 for additional information. You should discuss the tax problems resulting from foreclosure with a tax expert, such as a tax attorney, CPA or Enrolled Agent.
    Answer Applies to: California
    Replied: 5/4/2011
    The Schreiber Law Firm
    The Schreiber Law Firm | Jeffrey D. Schreiber
    A debt owed prior to the bankruptcy filing which was listed in the petition is discharged (unless reaffirmed). They may still send a 1099, but you need to file the IRS form with the IRS that the debt was discharged in bankruptcy when you file you tax return for the year when you receive the 1099.
    Answer Applies to: California
    Replied: 5/4/2011
    Law Office of L. Paul Zahn
    Law Office of L. Paul Zahn | Paul Zahn
    No, the bank cannot get a deficiency judgment. Your liability to the debt was discharged (provided that it was listed on your petition).
    Answer Applies to: California
    Replied: 5/4/2011
    Law Office of David P. Farrell
    Law Office of David P. Farrell | David Farrell
    If you received a discharge in your chapter 7 your personal liability for the mortgage(s) was extinguished. The lender cannot seek a deficiency judgment against you because you are no longer personally liable for the debt. However, the lien against the property securing the mortgage loan survives the bankruptcy, so the lender can still look to the property or "collateral" to satisfy the outstanding debt in the event you quit paying. If you receive a 1099, consult with a tax professional.
    Answer Applies to: California
    Replied: 5/4/2011
    Law Offices of Joseph A. Mannis
    Law Offices of Joseph A. Mannis | Todd Mannis
    They cannot come after you for a deficiency. As far as the 1099, if they 1099 you, you can file with the IRS a Form 982, which you can easily find on their website. It basically says you were in bankruptcy, and this debt was included, and that's that. However, having said that, please talk to your accountant in that regard, who is infinitely more familiar with 1099s and Form 982.
    Answer Applies to: California
    Replied: 5/4/2011
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