Disclaimer: I am not a lawyer. I am
only publishing my interpretation of my situation. You should seek your
own legal representation for your own particular
situation. Do not rely on my
opinions or statements for your own purposes as state
and local law varies as do individual circumstances.
Use LegalMatch to Find a Local Trustworthy Lawyer in Your Area.
I had breakfast today with a friend of mine who is going
through similar financial troubles as I am with real estate. He
had some surprising news about one of his properties. The one in
question is a one bedroom condo unit. He stopped making mortgage
payments on this property about the same time that I stopped
making mortgage payments on my properties - about November of
last year, 2007. He received a letter from his primary mortgage
holder that they were discharging the debt. Now, discharge is a
big word with huge implications. I have received a letter from
one of my mortgage companies stating that they were writing the
debt off as bad debt. A bad debt write-off means that the
mortgage company is writing the debt off of their books. A bad
debt write-off does not, however, mean that I no longer owe this
money. Instead, the company can still try to collect; but they
will most likely just sell the debt to a debt collector who will
then go after the money. I stand a better chance of not having
to pay the entire amount as the debt collector might settle for
less. At least, that might be a plus.
A discharge, however,
sounds a lot like the debt is forgiven; and the borrower no
longer owes the money - no more collection calls. My friend is
checking on this with his lawyer, but he has high hopes. Of
course, even if this is still the case, he had a second mortgage
on the property. That second mortgage holder will now probably
assume primary mortgage rights. He is still better off as this
second mortgage was far less than the original mortgage.
There is the question now
of forgiven debt and the I.R.S. recognizing that forgiven debt
as income. If this is the case, he would receive a 1099 and have
to claim that on his federal income tax return next year. We are
in Florida so he would not have to worry about a Florida income
tax return as Florida does not have an income tax.
The mortgage company that
sent my friend this letter is CitiMortgage. Coincidentally,
CitiMortgage holds a mortgage on one of my condos as well in
that same condominium complex. I am anxiously waiting to hear
from my friend as to what he finds out about his letter. Plus, I
am anxious to see if CitiMortgage sends me a letter. I will keep
you posted.
|
