[CLBS] Tax liability for debt forgiveness

[Ryan Dustin]

After filing but before discharge (or even the 341 meeting), Chapter 7
clients received a letter from the holder of a completely "unsecured" second
mortgage (house is worth less than balance on first mortgage) informing them
the second mortgage will be forgiven unless they decline the offer. "Your
second lien mortgage will be closed and the mortgage lien satisfied and
released!" 

 

1)      Does this happen often?

2)      What are the income tax consequences for them if they choose to
accept the offer? Does the IRS insolvency exclusion apply (Form 982)? 

 

Ryan S. Dustin 

THOMSEN STEPHENS LAW OFFICES, PLLC

2635 Channing Way  I  Idaho Falls, ID  83404

Tel (208) 522-1230  I  Fax (208) 522-1277

 <http://www.thomsenstephenslaw.com/> www.thomsenstephenslaw.com

 

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