Legal Question in Real Estate Law in Texas

Defiency Judgements & 1099-C with preforeclosure

I am a realtor and am representing a client in a short sale... and the bank is playing hard ball. They are trying to give my client a 1099-C for the cancellation of debt... the difference for what is owed and what we are going to sell the property for. (That we expected). But they are also saying they are going to try to get a deficiency judgement if the homeowner can not make a ''repayment'' plan in a few months. I have always been told that banks can not issue both a 1099 AND the deficiency... because a 1099 implies a ''forgiveness'' of debt.... and a deficiency does not imply that..... I told them that what they are trying to do is illegal... and they would not be in compliance with IRS rules. They tell me what they are doing it correctly and we could consult an attorney. What I would like to know is if you know something that we can say to them to make them understand what they are doing is wrong.


Asked on 11/05/07, 10:52 pm

2 Answers from Attorneys
Joseph A. McDermott, III Attorney at Law

Re: Defiency Judgements & 1099-C with preforeclosure

Well, you're just wrong, so no competent lawyer will give the advice you seek. I will be happy to report you to the state bar abd TREC for practicing law without a license (you gave your client a legal opinion), though.

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Answered on 11/06/07, 11:47 am
Cheryl Rivera Smith The Smith Law Firm

Re: Defiency Judgements & 1099-C with preforeclosure

You should contact the IRS and get an opinion from them. There is an 800# on their website at irs.gov. Good luck.

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Answered on 11/06/07, 2:16 pm


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