We received a 1099 on a property we short sold; can the bank come after us for the deficiency?

Submitted by Carolyn W from CA - 01/17/2010 - 1:37pm

We just short sold an investment property. I was told that the short sale does not wipe out the debt, and the bank can still try to collect or sell the debt. Does a 1099 create closure? Since we are liable to pay income tax on the losses, can the bank still try to collect, or does this mean that they will not pursue the debt and the books are closed? How can I find out?T hank you very much, CW

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Submitted by Charles Norman - 01/18/2010 - 10:29pm

The equation is binary: the lender can pursue a deficiency or they can write/charge it off and you will get a 1099. Best scenario is if you can get the lender to release the lien and settle the account as paid in full during the short sale negotiation.

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