When a homeowner has gone through a foreclosure more particularly in pre-foreclosure sale they may receive a 1099.
This is an accounting to the IRS that the home owner made an increase or profit through the year. However, because of the great substantial distress the homeowner has been under the 1099 may not adversely affect them.
The other options banks have are to give a deficiency judgment. This can be given if a short sale or foreclosure auction is followed. When you negotiate with the banks you can require that they not send a deficiency judgment.
In either case if a pre-foreclosure is done right the home owner may owe nothing and have no adverse effects against them other than their credit.
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