Budgeting

What You Should Know About the Right of Redemption

If you are a homeowner with a mortgage, you might have heard about your right to redemption. For those who have been struggling to make their house payments, this is one route that can be taken to avoid foreclosure.  

What is the Right of Redemption?

If you own real estate, making mortgage payments can be hard, but foreclosure is something that most people want to avoid. The right of redemption is basically a last chance to reclaim your property in order to prevent a foreclosure from happening. If mortgagors can manage to pay off their back taxes or any liens on their property, they can save their property. Usually, real estate owners will have to pay the total amount that they owe plus any additional costs that may have accrued during the foreclosure process. 

In some states, you can exercise your right to redemption after a foreclosure sale or auction on the property has already taken place, but it can end up being more expensive. If you wait until after the foreclosure sale, you will need to come up with the full amount that you already owe as well as the purchase price.  

How the right of redemption works

In contrast to the right of redemption, exists the right of foreclosure, which is a lender’s ability to legally possess a property when a mortgager defaults on their payments. Generally, when you are in the process of purchasing a home, the terms of agreement will discuss the circumstances in which a foreclosure may take place. The foreclosure process can mean something different depending on what state you are in, as state laws do regulate the right of foreclosure. Before taking ownership of the property through this process, lenders must notify real estate owner and go through a specific process. 

Typically, they have to provide the homeowner with a default notice, letting them know that their mortgage loan is in default due to a lack of payments. At this point, the homeowner then has an amount of time, known as a redemption period, to try to get their home back. The homeowner may have reason to believe that the lender does not have the right to a foreclosure process, in which case they have a right to fight it. 

The right of redemption can be carried out in two different ways:

  • You can redeem your home by paying off the full amount of the debt along with interest rates and costs related to the foreclosure before the foreclosure sale OR
  • You can reimburse the new owner of the property in the full amount of the purchase price if you are redeeming after the sale date. 

No matter what state you live in, you always have the right to redemption before a foreclosure sale, however there are only certain states that allow a redemption period after a foreclosure sale has already taken place. 

Redemption before the foreclosure sale 

It’s easy to get behind on mortgage payments, so it’s a good thing that our government believes in second chances. All homeowners have redemption rights precluding a foreclosure sale. When you exercise your right of redemption before a foreclosure sale, you will have to come up with enough money to pay off the mortgage debt. It’s important that you ask for a payoff statement from your loan servicer that will inform you of the exact amount you will need to pay in order save your property. 

Redemption laws allow the debtor to redeem their property within the timeframe where the notice begins and the foreclosure sale ends. Redemption occurring before a foreclosure sale is rare, since it’s usually difficult for people to come up with such a large amount of money in such a short period of time. 

The Statutory Right of Redemption after a foreclosure sale 

While all states have redemption rights that allow homeowners to buy back their home before a foreclosure sale, only some states allow you to get your home back following a foreclosure sale. Known as a “statutory” right of redemption, this right as well as the amount of time given to exercise it, has come directly from statutes of individual states. 

In the case of a statutory right of redemption, real estate owners have a certain amount of time following a foreclosure in which they are able to redeem their property. In order to do this, the former owner must pay the full amount of the foreclosure sale price or the full amount that is owed to the bank on top of additional charges. Statutory redemption laws allow for the homeowners to have more time to get their homes back. 

Depending on what state you live in, the fees and costs of what it takes to exercise redemption may vary. In many cases during a foreclosure sale, real estate will actually sell for a price lower than the fair market value. When this happens, the former owner has a slightly higher chance of being able to redeem the home. 

What You Should Know About the Right of Redemption is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

Family Finance, Personal Finance, Real Estate

What Does a Real Estate Attorney Do?

If you’re planning to buy or sell a house or a rental investment property, you might consider hiring a real estate attorney.

A real estate lawyer can provide legal protection. They can help you navigate the home-buying process, which can be complex.

In fact, many states require a real estate lawyer to be present at closing. 

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Even if you live in a state that doesn’t require you to have a real estate attorney, it’s important to have one by your side.

But it’s also important to know who you’re dealing with, what they can do for you, and what’s in it for them.

Real estate attorneys can help structure transactions and closing. They will review documents well in advance before the closing to make sure there are no errors.

Real estate lawyers, however, can only represent one of the parties. The buyer and the seller’s interests can often be in conflict. Therefore, the attorney should never represent both parties. 

Besides representing you in sales transactions, real estate attorneys can represent you in a courtroom as well.

During the home-buying process, disputes between the buyer and the seller may arise that will have to settle in court.

The real estate attorney’s qualifications

A real estate attorney, just as any lawyer, has attended 3 years of law school. In law school, they take courses in law in general, including real property and other real estate classes.

During law school, they may do internships at law firms which specialize in real estate law.

Once they graduate law school, they take to bar exam in the state they want to practice in.

Once they become licensed to practice, they can work in a law firm specializing in real estate law.

The real estate lawyer’s fees

A real estate attorney can charge by the hour or a fixed fee. How much their charge for their services depends on their reputation, their level experience, the level of complexity.

Regardless of the fee, your attorney will discuss it with you. Their hourly fee is typically between $150 to $350.

They’ll draft a retainer agreement and make the necessary disclosures before you can retain them.

The attorney’s role in real estate transaction

Real estate attorneys can have many roles. Their roles will vary depending on whether it is a simple transaction or a complex one, and whether a real estate broker is involved.

In some cases, a real estate broker can handle many aspects of real estate transactions. If that case, the real estate attorney’s role is often limited.

In other instances, the real estate lawyer plays a crucial role in all phases of the real estate transaction.

Nonetheless, a real estate attorney’s roles include acting as a legal counselor, negotiator, advisor and coordinator.

Real estate attorney as a legal counselor

A real estate attorney acting as a legal counselor can handle drafting the proposed contract. If there is a broker involved, the broker will prepare the contract.

But, your attorney will review it for any proposed changes. Your lawyer can also draft the deed and examine title documents.

If you retain a real estate agent or broker, your attorney may also review the broker’s agreement before you sign it.

Real estate attorney as a negotiator

If you hire a real estate lawyer before you sign a contract or before engaging in any contract negotiations, your attorney will assume that role. All communications from the other party or his or her attorney will be directed to your lawyer.

Your attorney will negotiate proposed changes to the contract, including the price of the house. They will review any mortgage contingency clauses.

In addition, your real estate attorney can negotiate the following matters:

  • Personal property to be included;
  • Repairs before closing;
  • The closing date;
  • You may not get a mortgage commitment within the stipulated date in the contract. So, your attorney may negotiate an extension of time to obtain the mortgage;
  • You may need an early possession of the house. Your lawyer can negotiate that.

Real estate attorney as an advisor

You, as a client, may not need strict legal advice. You may just want your lawyer to be present for general advice. If you’re a first time home buyer or an elderly buyer, your attorney can also act as an advisor.

Real estate attorney as a coordinator

Your attorney can also act as your coordinator. Residential closings involve a lot of steps. And not everyone involved will follow them.

So, one of your real estate lawyer’s role is to contact the brokers, the title insurers, the mortgagees. They will also monitor the progress of obtaining financing, title policy, etc.

They will also contact the other attorney to make sure all parties are ready for the closing.

Your attorney’s responsibilities before closing

If you hire a real estate lawyer to represent you either as a seller or buyer, his or her responsibility before closing include the following:

  • Make sure you, as a buyer or seller, can fulfill the requirements imposed by the real estate sale contract
  • Review the title insurance;
  • Check the mortgage commitment;
  • Monitor status of the contract contingencies;
  • Examine closing documents for accuracy;
  • Coordinate closing date and time with the mortgage lender, seller and buyer’s broker;
  • If buyers will not attend the closing, obtain power of attorney for property to cover documents to be signed at closing;
  • Get wire instructions for payment of balance due at closing

In case a dispute arises between the parties, the real estate attorney can represent you in court.

Issues that might arise include damages and earnest money forfeiture, specific performance, misrepresentation, etc.

Do I need a real estate attorney?

Some states require a real estate attorney to be present during closing. They include Massachusetts, Maine, Alabama, Connecticut, Delaware, Georgia, Florida, Kansas, Kentucky, Virginia, West Virginia, South Carolina, Rhode Island, Pennsylvania, New York, North Dakota, Mississippi, New Hampshire, and New Jersey.

If you don’t live in any of these states and the District of Columbia, it’s really up to you if you want to hire a real estate attorney. If you’re just trying to save money and can barely afford to buy a house, you’re probably don’t need a real estate lawyer.

But if your real estate transaction is complex, a good real estate attorney can be an asset.

The bottom line…

Some states do not require you to have a real estate attorney during closing. However, it’s worth the cost hiring one especially if you’re buying a house in foreclosure.

Work With A Financial Advisor Near You

If you have questions beyond hiring a real estate attorney, you can talk to a financial advisor who can review your finances and help you reach your goals. Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goalsget started now.

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The post What Does a Real Estate Attorney Do? appeared first on GrowthRapidly.

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How Does a HELOC Affect a Credit Score?

Yes, home equity lines of credit (HELOC) can have an impact on your credit score. Whether that impact to your credit score is negative or positive depends on how you manage your HELOC. It also depends on your overall financial situation and ability to make timely payments on any amount you borrow via your home equity line of credit. Find out more about how a HELOC affects a credit score.

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What Is a HELOC?

HELOC stands for home equity line of credit. If you have equity in your home, you can use it to take out a line of credit up to that value. Whether or not you’re approved for a HELOC depends on your credit history. However, a HELOC is not a second mortgage.

Unlike a mortgage, you can take out money from your HELOC as you need it—using only the amount you need—and paying your loan back in a revolving manner or in monthly payments. It works a lot like a credit card but with a larger available credit limit. For example, if you have $40,000 in equity and get approved for a HELOC for the total amount, you can take out up to that much in funds.

You might take out $10,000 to put siding on your house and begin paying back that amount according to your lending agreement. Later, you might want to cover some of your child’s college tuition, using another $5,000 of the HELOC. You continuously payback what you borrowed on the equity line unless you have paid back all of the balance.

It’s important to note that a HELOC is credit that is extended based on your home’s value. That means if you default on your home equity line of credit—you take out money and never make the required payments—you could eventually be dealing with a foreclosure situation.

How is a HELOC Different from a Home Equity Loan?

HELOCs and home equity loans do share some similarities. In both cases, you’ll be taking out a loan from your home equity. But while your home equity loan will give you the money all at once, a HELOC gives you a set amount of money, as you need it, that you can borrow and payback.

Home equity loans are similar to any other loan—an equity loan you take out will have a fixed interest rate, lump sum, etc. On the other hand, home equity lines of credit do have an interest rate, but they’re typically lower and only applied to the amount of money you take out.

Is a Home Equity Line of Credit a Good Idea?

Whether or not any type of credit is a good idea depends on your personal financial situation. If you’re drowning in debt and using your home equity to pay the bills, you’re just swapping one type of financial issue for another. But if you’re using your HELOC to payoff high-interest credit card debt so you only have a single, lower-interest debt to worry about, this might be a smart move.

Only you can decide if a home equity line of credit is a good idea for you. However, if you have a poor credit score or other negative factors, you may not get approved for a HELOC. Or, the HELOC may come with unfavorable terms that make it too expensive to use as a form of credit. You may want to work on fixing your credit before applying for home equity lending.

How Does a HELOC Affect a Credit Score?

Any type of credit you use can impact your credit score. When you take out a HELOC, you extend how much available credit you have. If you open the line and don’t use any of the credit, your credit utilization rate will be improved, which could also potentially improve your credit score. And if you make timely payments on credit you borrow from this equity line, those are positives that can be reported on your credit history.

On the other hand, if you take out a large portion of your equity line, you have a higher credit utilization rate, which can hurt your score. Failing to make timely payments could also potentially drop your score. Since HELOC rates can be variable, you must plan for fluctuating payment requirements to avoid this issue.

Do Unused Credit Lines Hurt Your Credit Score?

Unused lines of credit typically improve your utilization rate, which would improve your credit score. However, HELOCs are a type of revolving credit, just like a credit card.

If you have a huge amount of unused credit, some lenders might see you as a potential risk—especially if you don’t have the income to back up this credit. This is because you could suddenly take out a large amount on this equity line without the income to pay it back, putting your other debts at risk too.

What Are the Benefits of a HELOC?

Just like any other loan, there are pros and cons to taking out a HELOC. The benefits of a home equity line of credit include the ability to get a large amount of credit based on your home’s value and flexible options for managing that credit. You can use it as you need it, which gives you more control over what type of payments you need to make at any given time.

What Are the Disadvantages of a Home Equity Line of Credit?

The biggest disadvantage of a HELOC is that it’s tied to your home, which means there’s a slight risk of foreclosure or a home lien if you don’t make your payments. The payments may also work on a variable interest, which means this isn’t always the most affordable credit option for homeowners.

It can also look like a large credit card account on your report, so if you only need a small amount of credit on a short-term basis, you might want to consider personal loan options instead.

The post How Does a HELOC Affect a Credit Score? appeared first on Credit.com.

Source: credit.com

Identity Theft, Mortgage News

Partial Claim May Be Option for VA Borrowers Exiting COVID-19 Forbearance

The Department of Veterans Affairs (VA) has proposed a new loss mitigation method to help homeowners with VA loans in COVID-19 related forbearance get back on track. The new program, known as the COVID-19 Veterans Assistance Partial Claim Payment program, or COVID-VAPCP for kind of shorter, somewhat mirrors existing programs offered by the FHA and [&hellip

The post Partial Claim May Be Option for VA Borrowers Exiting COVID-19 Forbearance first appeared on The Truth About Mortgage.

Source: thetruthaboutmortgage.com

Family Finance, Home Loans

Is Your Mortgage Forbearance Ending Soon? What To Do Next

mortgage forbearanceSEAN GLADWELL / Getty Images

Millions of Americans struggling to make their monthly mortgage payments because of COVID-19 have received relief through the Coronavirus Aid, Relief, and Economic Security Act.

But mortgage forbearance is only temporary, and set to expire soon, leaving many homeowners who are still struggling perplexed on what to do next.

Enacted in March, the CARES Act initially granted a 180-day forbearance, or pause in payments, to homeowners with mortgages backed by the federal government or a government-sponsored enterprise such as Fannie Mae or Freddie Mac. Furthermore, some private lenders also granted mortgage forbearance of 90 days or more to financially distressed homeowners.

According to the Mortgage Bankers Association, 8.39% of loans were in forbearance as of June 28, representing an estimated 4.2 million homeowners nationwide.

So what are affected homeowners to do when the forbearance goes away? You have options, so it’s well worth contacting your lender to explore what’s best for you.

“If you know you’re going to be unable to meet the terms of your forbearance agreement at its maturity, you should call your loan servicer immediately and see what options they may be able to offer to you,” says Abel Carrasco, mortgage loan originator at Motto Mortgage Advisors in St. Petersburg, FL.

Exactly what’s available depends on the fine print in the terms of your mortgage forbearance agreement. Here’s an overview of some possible avenues to explore if you still can’t pay your mortgage after the forbearance period ends.

Extend your mortgage forbearance

One simple option is to contact your lender to request an extension.

Homeowners granted forbearance under the CARES Act can request a 180-day extension, giving them a total of 360 days of forbearance, according to the Consumer Financial Protection Bureau.

The key is to contact your lender well before your forbearance expires. If you let it expire without an extension, your lender could impose penalties.

“If you just stop making regular, scheduled payments, you could have a late mortgage payment on your credit,” warns Carrasco. “That could severely impact refinancing or purchasing another property in the immediate future and potentially subject you to foreclosure.”

Keep in mind, though, a forbearance simply delays payments, meaning they’ll still need to be made in the future. It doesn’t mean payments are forgiven.

Refinance to lower your mortgage payment

Mortgage interest rates are at all-time lows, hovering around 3%. So if you can swing it, this may be a great time to refinance your home, says Tendayi Kapfidze, chief economist at LendingTree.

Refinancing could come with some hefty fees, however, ranging from 2% to 6% of your loan amount. But it could be worth it.

A lower interest rate will likely lower your monthly payment and save you thousands over the life of your mortgage. Dropping your interest rate from 4.125% to 3% could save more than $40,000 over 30 years, for example, according to the Consumer Financial Protection Bureau.

“Lenders have tightened standards, though, so you will need to show that you are a good candidate for refinancing,” Kapfidze says. You’ll need a good credit score of 620 or higher.

As long as you’ve kept up your end of the forbearance terms, having a mortgage forbearance shouldn’t affect your credit score, or your ability to refinance or qualify for another mortgage.

Ask for a loan modification

Many lenders are offering an assortment of programs to help homeowners under hardship because of the pandemic, says Christopher Sailus, vice president and mortgage product manager at WaFd Bank.

“Lenders quickly recognized the severity of the economic situation due to the pandemic, and put programs into place to defer payments or help reduce them,” he says.

A loan modification is one such option. This enables homeowners at risk of default to change the terms of their original mortgage—such as payment amount, interest rate, or length of the loan—to reduce monthly payments and clear up any delinquencies.

Loan modifications may affect your credit score, but not as much as a foreclosure. Some lenders charge fees for loan modifications, but others, like WaFd, provide them at no cost.

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Watch: 5 Things to Know About Selling a Home Amid the Pandemic

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Put your home on the market

It may seem like a strange time to sell your home, with COVID-19 cases growing, unemployment rising, and the economy on shaky ground. But, it’s actually a great time to sell a house.

Pending home sales jumped 44.3% in May, according to the National Association of Realtors®’ Pending Home Sales Index, the largest month-over-month growth since the index began in 2001.

Home inventory remains low, and buyer demand is up with many hoping to jump on the low interest rates. Prices are up, too. The national median home price increased 7.7% in the first quarter of 2020, to $274,600, according to NAR.

So if you can no longer afford your home and have plenty of equity built up, listing your home may be a smart move. (Home equity is the market value of your home minus how much you still owe on your mortgage.)

Consider foreclosure as a last resort

Foreclosure may be the only option for many homeowners, especially if you fall too behind on your mortgage payments and can’t afford to sell or refinance. In May, more than 7% of mortgages were delinquent, a 20% increase from April, according to mortgage data and analytics firm Black Knight.

“When to begin a foreclosure process will vary from lender to lender and client to client,” Sailus says. “Current and future state and federal legislation, statutes, or regulations will impact the process, as will the individual homeowner’s situation and their ability to repay.”

Foreclosures won’t begin until after a forbearance period ends, he adds.

The CARES Act prohibited lenders from foreclosing on mortgages backed by the government or government-sponsored enterprise until at least Aug. 31. Several states, including California and Connecticut, also issued temporary foreclosure moratoriums and stays.

Once these grace periods (and forbearance timelines) end, and homeowners miss payments, they could face foreclosure, Carrasco says. When a loan is flagged as being in foreclosure, the balance is due and legal fees accumulate, requiring homeowners to pay off the loan (usually by selling) and vacating the property.

“Absent participation in an agreed-upon forbearance, deferment, repayment plan, or loan modification, loan servicers historically may begin the foreclosure process after as few as three months of missed mortgage payments,” he explains. “This is unfortunately often the point of no return.”

The post Is Your Mortgage Forbearance Ending Soon? What To Do Next appeared first on Real Estate News & Insights | realtor.com®.

Source: realtor.com

Debt, Mortgage, Taxes

1099-C: What You Need to Know about the Cancellation of Debt Tax Form

From early January to mid-February, you might receive a number of tax documents in the mail. They can range from expected W-2s from your employer to forms about mortgage interest you paid. One form that many people don’t expect is the 1099-C. Discover why you would receive such a form and what the IRS expects you to do with it. Make sure to consult with your tax professional for your specific situation.

What Is a 1099-C Form?

A 1099-C is a tax form required by the IRS in certain situations where your debts have been forgiven or canceled. The IRS requires a 1099-C form for certain acts of debt forgiveness because it sees that forgiven debt as a form of income.

For example, if you borrowed $12,000 for a personal loan and only paid back $6,000, you still received the original $12,000. Not paying back the other half of the loan means you got the benefit of that money without paying for it. The IRS considers that to be income in many cases.

Why Did You Get a 1099-C Form?

Not every debt cancellation involves a 1099-C form. But if you received this form in the mail, it’s because of a debt cancellation that occurred at some point during the tax year.

Box 6 on the 1099-C form should have a code to help you determine why you received the form. You can also learn more about 1099-C cancellation of debt processes and the reasons you might receive such a form if you’re not sure whether yours is accurate.

The IRS provides instructions and information about 1099-C forms and cancellation of debt in general. That includes a list of potential codes that might be found in Box 6:

  • A—Bankruptcy (Title 11)
  • B—Other judicial debt relief
  • C—Statute of limitations or expiration of deficiency period
  • D—Foreclosure election
  • E—Debt relief from probate or similar proceeding
  • F—By agreement
  • G—Decision or policy to discontinue collection
  • H—Other actual discharge before identifiable event

What Should You Do with a 1099-C Form?

You should never ignore any tax form you receive, as each might have positive or negative implications on your tax return. But you should also not panic if you receive a 1099-C form indicating a large amount of income. It doesn’t necessarily mean that you will owe a lot more in taxes.

First, find out whether the type of debt cancellation on the 1099-C form is excluded from taxable income. The IRS provides a list of exclusions, which include debts that were forgiven because you were insolvent or involved in certain types of bankruptcies. It’s a good idea to double check with your bankruptcy lawyer about whether you need to claim 1099-C income relevant to your bankruptcy discharge.

Once you know whether you need to claim the income or not, you must incorporate the 1099-C into your federal tax filing. If the canceled debt doesn’t fall under an exclusion, you report it as “other income” on your tax return.

That income will be included with your other income in determining how much tax you must pay for the year. In short, you’ll have to pay taxes on the extra income. That might mean your refund is reduced or that you owe more taxes than you would otherwise.

In cases where the 1099-C canceled debt falls under an IRS exclusion—which means you don’t have to pay taxes on all or some of the income—you still may need to file a form. The creditor that sent you the 1099-C also sent a copy to the IRS. If you don’t acknowledge the form and income on your own tax filing, it could raise a red flag. Red flags could result in an audit or having to prove to the IRS later that you didn’t owe taxes on that money.

Luckily, the IRS provides a form for this purpose. It’s Form 982, the Reduction of Tax Attributes Due to Discharge of Indebtedness.

What to Do if You Received a 1099-C Form After Filing Your Taxes

If you don’t know a 1099-C form is coming—and many people don’t realize they might receive one—you could file your taxes before it arrives. You should file an amended return if this happens. That’s true even if the 1099-C doesn’t change your tax obligation, as you might want to get the Form 982 on record for documentation purposes. 

What’s the 1099-C Statute of Limitations?

There aren’t really statutes of limitations on cancellation of debt, though the IRS does have rules about when these forms should be filed. The creditor must file a 1099-C the year following the calendar year when a qualifying event occurs. That just means the creditor must file the next year if they discharge or forgive a debt.

If the creditor files a 1099-C with the IRS, then typically it must provide you with a copy by January 31 so you have it for tax filing purposes that year. This is similar to the rule for W-2s from employers.

However, there is no rule for how long a creditor can carry debt on its books before it decides it’s uncollectible. So, if your debt isn’t canceled via repossession, bankruptcy, or other processes, cancellation could happen at any time. The creditor doesn’t have to tell you about it other than sending the 1099-C.

Is a 1099-C Form Good or Bad for Your Credit?

The 1099-C form shouldn’t have any impact on your credit. However, the activity that led to the 1099-C probably does impact your credit. Typically, by the time a creditor forgives a debt, you’ve engaged in at least one of the following activities:

  • Failed to make payments for an extended period of time
  • Negotiated a settlement on the debt
  • Entered into a program with the creditor because you can’t pay the debt, such as a home short sale or voluntary repossession
  • Been sent to collections
  • Had a foreclosure or repossession
  • Gone through a bankruptcy
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All of those are negative items that can impact your credit report and score for years. So, while getting a 1099-C itself doesn’t change your credit at all, you’ve probably already experienced a negative hit to your score.

Get Tax Help if You Receive a 1099-C

As with other tax topics, the 1099-C can be complicated. It’s a good idea to work with a professional when dealing with complicated tax matters or trying to reduce your tax burden legally.

The post 1099-C: What You Need to Know about the Cancellation of Debt Tax Form appeared first on Credit.com.

Source: credit.com