Archive for February, 2011

Did You Know Past Due Child Support Can Keep You From Getting a Passport?

When someone owes child support of $2500 or more, they are put on a list that denies them the ability to obtain a passport. Once adequate arrangements are made for payment of the child support, they can be taken off the list. However, it can take several weeks before that happens.

You should contact the State Child Support Enforcement Agency in the state where you owe child support and make sure that they contacted the U.S. Department of Health and Human Services (HHS) to inform them that acceptable arrangements for payment had been made.

HHS takes your name off the list of those who are in arrears of child support. They send notice to the Department of State Passport Services which enables you to apply for a passport.United States Passport

What is a Deed of Trust?

A deed of trust is an arrangement among three parties: the borrower, the lender, and an impartial trustee. In exchange for a loan of money from the lender, the borrower places legal title to real property in the hands of the trustee who holds it for the benefit of the lender, named in the deed as the beneficiary. The borrower retains equitable title to, and possession of, the property.

The terms of the deed provide that the transfer of legal title to the trustee will be void on the timely payment of the debt. If the borrower defaults in the payment of the debt, the trustee is empowered by the deed to sell the property and pay the lender the proceeds to satisfy the debt. Any surplus will be returned to the borrower.

Deed of trust is a document which pledges real property to secure a loan, used instead of a mortgage in the following states; Alaska, Arizona, California, Colorado, Georgia, Idaho, Illinois, Mississippi, Missouri, Montana, North Carolina, Texas, Virginia, and West Virginia.

If you have any questions about deeds of trust, or real estate law, call the Law Office of Gregory A. Ross, PC at 940-692-7800, or email us at info@gregoryrosspc.com

What is an Owelty Deed or Lien?

An owelty of partition is an instrument used to allow one co-owner of property to buy the interest of the other co-owners while using 100% of the interests as collateral for a loan to acquire the property.  Common examples are in the situation of divorces, probates and division of co-owned assets by people who are not partners.

In Texas there are limited ways to create an encumbrance (a lien or mortgage) against real property that is a person’s homestead.  The most common ways to create such an encumbrance are for purchase money loans, or for home improvements loans.  And while home equity loans are allowed in Texas, equity loans can be made only up to 80% of the value of the real property.  These restrictions come into play when a person tries to buy out a co-owner of real property, and finance that purchase through a Lender.  While a purchase money lien or mortgage would attach to the interest being purchased, it would not attach to the interest the person already owns.  Most lenders would not want to loan money and accept a mortgage against anything other than 100% of the property.

That is where the owelty deed or owelty lien comes into play.  In 1995, the Texas Constitution was amended to specifically designate an owelty of partition as one of the permitted encumbrances on a Texas homestead.  For an owelty of partition to properly be ordered, the owners must be co-tenants.  If the court vests title in one party and divests the other, they are no longer co-tenants and no owelty of partition can be ordered.  A court-imposed lien does not extend to the interest already owned by the acquiring party.  Only an owelty lien can reach that interest.

If you have any questions about owelty of partition, or jointly owned real property, call the Law Office of Gregory A. Ross, PC at 940-692-7800, or email us at info@gregoryrosspc.com

IRS Form 1099-C: Discharged Debt is NOT Income

If you settle a debt for a certain amount of money, the amount you don’t have to pay is “forgiven.”  Using a really simple example, if you have a $10,000 debt, and you settle it for $5,000, the creditor has forgiven the remaining $5,000.

Creditors are known to file IRS Form 1099-C on that forgiven debt.  As I’ve mentioned here when discussing debt settlement, that forgiven amount can be considered income.  Tax liability on that amount is something to be considered in determining the affordability of a debt settlement.

If debts are discharged in bankruptcy, is that considered income?  No.

But if that’s the case, why am I hearing from reliable sources that debtors all over the country are receiving IRS Form 1099-Cs from former creditors?  What’s going on?  And what can YOU do about it?

It’s wise that you not ignore it.  Talk to your tax professional about filing Form 982 (Reduction of Tax Attributes Due to Discharge of Indebtedness), at least for the amount reported in the 1099-C.  I have seen that it can take up to a few years for the IRS to determine that you under reported your income because you did not include income from a 1099-C.  This form will report the essential facts to the IRS which will show that you are not responsible for the taxes on this “income.”

If you filed bankruptcy and received a Form 1099-C from a creditor, speak to your bankruptcy attorney.

While the creditor is allowed to file a 1099-C, they are required to make sure it is accurate, including indicating on the form that the debt was discharged in bankruptcy (see Box 6 of Form 1099-C, and IRS instructions).  Even so, debtors will find it unsettling – even more so if they receive inquiry from the IRS next year, or the year after requesting an explanation as to what might be perceived as under-reported income.

Since it’s tax time, it’s important that I at least sound the alarm that something may not be right with creditors issuing IRS form 1099-Cs.  If you’re in chapter 13 or if you have received a discharge, make sure you’re not getting a 1099-C that you do not deserve, and if you do be proactive to avoid problems down the road.