If my mortgage company files an IRS 1099-C for a ‘debt forgiveness.’ How much might I owe to the IRS?
So, My mortgage company sent me letter saying if I pay them 27,000(rounded off) by a certain date they will forgive my total debt of (76,000) on my 2nd mortgage. The letter tells me if I elect to do this special payoff offer they will file an IRS 1099-C form for the amount of debt forgiveness. I’m assuming this is 50,000? Or is it the full 76,000? So I did a little research and found out that if a 1099-C is filed against me then that to the IRS is an earned income? So does anyone know if I do happen to participate with this how much I might owe the IRS ? I am seriously considering taking this offer just to not have a 2nd mortgage anymore but if it’s going to just end up messing up everything then I don’t know if it’s worth it?
**Also does this mean they are going to foreclose my home? I am behind on my 1st mortgage. Both my 1st and 2nd are through the same company. I am in the process of doing a loan modification with my 1st mortgage and am on a special plan. I have been in constant contact with the lender.