Ok, revisiting COD dilemma. Client had what he thought was an equity line on what was his principle residence. Turned the principle residence into a rental in may 2007, when he lost his tenants in his rental house (he moved into what was the rental..a real showcase property that had been generating high, high rents). New tenants in what had been principle residence trashed the place and split. Client didn't have the funds to fix up the former principle residence, and it foreclosed in november 2007.
In late January/early Feb, he filed bankruptcy. Line of credit on foreclosed house listed on bk. Then he gets a 1099-C for the LOC, with cancellation debt listed as VISA (!) and a cancellation date of 12/10/07 (the foreclosed house was sold on 12/7/07). I know someone else who has an equity LOC with this same credit union, and although she (and client) gets 1098 for the interest, it is showing up as unsecured personal debt on her credit report. So we are not sure what flakey thing this credit union is doing.
Question: for the 982, can I list this as a debt in bk? Use principle residence exclusion for at least some of the debt (the part that was used for improvements on foreclosed house)? Then I could get the rest on the insolvency exemption.
In late January/early Feb, he filed bankruptcy. Line of credit on foreclosed house listed on bk. Then he gets a 1099-C for the LOC, with cancellation debt listed as VISA (!) and a cancellation date of 12/10/07 (the foreclosed house was sold on 12/7/07). I know someone else who has an equity LOC with this same credit union, and although she (and client) gets 1098 for the interest, it is showing up as unsecured personal debt on her credit report. So we are not sure what flakey thing this credit union is doing.
Question: for the 982, can I list this as a debt in bk? Use principle residence exclusion for at least some of the debt (the part that was used for improvements on foreclosed house)? Then I could get the rest on the insolvency exemption.
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