DEAR BENNY: I have a question relating to a forgiveness-of-debt issue. Let's say a borrower takes out a home loan for $600,000. Later, the borrower defaults and the lender files for foreclosure. Eventually, the borrower is able to conclude a short sale for $500,000. The borrower receives a letter from the lender stating his loan is "paid in full." Because of the letter, the borrower is under the impression that he will not receive a 1099-C from the lender showing forgiveness of the $100,000 canceled debt.
In your experience, is this true, even though the lender may have said the loan is "paid in full"? I was under the impression that lenders were obligated to send borrowers a 1099-C if the debt forgiven exceeded $600. --John