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Az Piano Lady 14

Heloc Cancelled----Tax Implications ?

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Hi, I have never in 11 years been late on a pmt on my mortgage.  A different bank gave me a Heloc and then in 2008 reappraised and raised that amt.  And when it all crashed and interest went way high, I defaulted on said Heloc.   After trying unsucessfully to contact me,  the bank sent it to a collection agency.

 

I thought I may be sued and asked for DV.  A month later they sent it.  Heard nothing for about 4 months when they sent it back to the bank.

 

The bank kept sending offers lower and lower to settle and I was very close to cashing IRA but they would still tax me on the difference.

 

This week I got a letter saying they cancelled the debt and will release the lien with the county recorder and 1099-C me.

 

So , my question here is what will the tax implications be??  Could I be insolvent? And what will this do to my credit.?    Has anyone had their Heloc cancelled????  Thanks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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You will get a 1099-C for the full amount of the HELOC + accumulated interest. You should get it this year (and I would ask for it). The interest was probably tax deductable so I would not worry about that. As for insolvency, you will need to work with a tax preparer to determine that (and I would do so in this situation because quite a bit of money is on the line).

As for your credit, they can keep the tradeline open for the reporting period (7 years from DOFD) because even though they forgave the debt, you technically still owe it. However, they do not intend to foreclose either so you will probably keep the house. Check to make sure however that they do remove the lien at the county recorders office.

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Hi, Thanks, They could not foreclose as the first is with a different lender and has always been current.  The only way was if they bought out the first.  So is the 7 years from date of first missed pmt or from date of debt cancellation??

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