1099c mortgage cancellation of debt-- not a short sale!

I recently got a 1099c from my mortgage lender for about $300k. I'm in ch13 and have been making mortgage payments throught the bankruptcy trustee for the past 9 months.

Most of what I've read about 1099c situations are when a short sale occurs--someone sells a home for less than the mortgage, therefore the lender submits a 1099c for the difference. That's not the case here.

I've got my ch13 attorney looking into this, but I'm not impressed with his aggressiveness, even though he thinks we may be in a negotiating position. The 1099c box 6 is not checked (not cancelled due to bankruptcy). The "fair market value" box on the 1099c is over $600k. We currently occupy the house as our primary residence.

Any ideas what's going on here?

Is your bankruptcy trustee making your payments to the lender????
Has your lender made any agreements to reduce your loan?

Your lawyer should be all over the trustee.
Your lawyer should be talking to the bank too to make sure the payments are received and credited to your account/mortgage.

If the mortgage lender has been receiving your payments there should be no need for the 1099.

Ask the trusee for prof your mortgage is being paid.
Did you receive a mortgage statement from the bank?
How does the balance, payments, interest compare to last year's statement,
Check it out, does it make sense to you?

Thanks for responding.

Yes, the trustee is making payments to the lender. No, lender has not made agreements to reduce the loan. I'm able to login to the Ch13 Trustee web site and see that the mortgage balance is being reduced appropriately. It all makes sense.

My lawyer said today that, however, that according to IRS Code Section 108, the 1099c is "conclusive evidence" of a cancellation of debt. Even if I had to pay taxes on the $300k, I'd be better off than owing the $300k, right?

Johntmcii,

"My lawyer said today that, however, that according to IRS Code Section 108, the 1099c is "conclusive evidence" of a cancellation of debt. Even if I had to pay taxes on the $300k, I'd be better off than owing the $300k, right?"

The taxes on $300,000 would be less than $300,000, true.
The total tax would be due now.
With the debt foregiven, are you in effect giving up the house?
That is the question for your lawyer.

Has your lawyer read your mortgage agreement? The lawyer should.

Just received a 1099-C for $33,000 "forgiven" when we sold our house for below what we owed. Two questions:

Why did I receive this form after April 15? Thankfully, I had already filed an extension.

Also, I am currently paying back $30,000 through an agreement with the PMI company. $200 a month for the next 12 1/2 years.

It seems I shouldnt have to claim the $33,000 as income, no?

MarkusZ, if $33,000 was forgiven, then you have to claim it as income. If a second debt of $30,000 is still being repaid, then that would have no bearing at all on the first debt that was already forgiven.

There are some possible ways not to owe federal taxes on the forgiven debt, one way is if you qualify for tax relief due to the "Mortgage Forgiveness Debt Relief Act of 2007." But this law says that you have to stay in your home after the debt was forgiven, this law does not help people who did a short sale, which is what I think you did.

Another way you "may" escape taxation is if you were the victim of predatory lending practices. You will definitely need to consult a tax professional if you want to pursue this course.