The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: mozar on November 29, 2014, 10:34:20 AM
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My dad, after many many missteps, finally lost his house to foreclosure. He had two mortgages on it. The mortgage company says that they will forgive both, but he won't be 100% sure until he gets the paperwork. The mortgages equaled 300k (about).
Say the house was bought for 100k (unlikely, but hear me out). He will have been forgiven for 200k. My understanding is that he will have to pay taxes on the forgiven amount of 200k, unless he can prove to the IRS he is insolvent. Does anyone know how this works? He has no other assets, and plenty of other debt. Would an insolvency go on his record like a bankruptcy?