Debt Relief Facts
Frequently Asked Questions About Debt Relief

Learn more about debt relief facts with these Frequently Asked Questions about debt relief on a foreclosed property.

Q: How do I know whether or not title has transferred on a foreclosed property?

A: Check in with the local title company or call the lender.

Q: If a buyer gets two mortgages at the time of a purchase, are they both acquisition debt AND both nonrecourse?

A: They are both aquisition debt, however, the second trust deed may be recourse by the terms of the deed of trust. The first is not by operation of law.

Q: In a judicial foreclosure, how long does the lender have to hold the property before sale?

A: For one year.

Q: Are rental property mortgages recourse?

A: Yes they are.

Q: Can you use the new rules for qualifying residence debt exclusion and insolvency for nonqualifying debt?

A: Yes. You can use the exclusion for qualifying debt and the insolvency exception for the nonqualifying discharged debt per Publication 4681. However, if the qualifying residence debt exceeds $2,000,000.00, you cannot exclude the excess under the insolvency exception.

Q: If I have multiple foreclosures, do I compute insolvency for each one?

A: Yes. You are allowed the exclusion only to the extent of insolvency at the time of each debt cancellation.

Q: If a taxpayer does not receive a 1099-C, is COD still income?

A: Yes. Many taxpayers do not get the forms because they move or fail to notify the lender of their current address.

Q: Where do I report COD income from a rental or business foreclosure?

A: Nonbusiness COD income goes on Form 1040, line 21 (Other Income), rental COD income goes on Schedule E and business COD income is reported on Schedule C.

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