[WSBAPT] Spousal award in lieu for Deficiency judgment

[Jane Bitz]

Melinda:

I had a case where the couple had a motor home that was repo'd for quite a bit less than the amount of the loan owed. The creditor filed a claim in the probate and we included the creditor and the amount owed on the loan in our Petition for Spousal Award. The Order specifically said that the creditors could not pursue collection against my client and so the debt was "wiped out".  

The next January my client received a 1099 for the amount of the deficiency between the amount owed and what the vehicle sold for. Her accountant was successful in challenging the inclusion of the deficiency as income under an IRS rule for hardship by submitting our pleadings for the spousal award to the IRS. I think she paid the tax (under protest) to avoid further penalties and interest being tacked on, then she got a refund.

I am not sure what the creditor would have done if we had offered to make a payment of a small % of the amount owed instead of just going to Court on the Spousal Award. I still think they would report the difference in the loaned amount vs. what they received in payment as "loan forgiveness income" to the IRS.

Jane.

Jane G. Bitz
Of Counsel
Wolff, Hislop & Crockett, PLLC
12209 E. Mission Ave, Suite 5
Spokane Vallley, WA 99206-4824
(509) 927-9700 x126
FAX: (509) 777-1800


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-----Original Message-----
From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Melinda
Sent: Tuesday, October 22, 2019 12:00 PM
To: wsbapt at lists.wsbarppt.com
Subject: [WSBAPT] Spousal award in lieu for Deficiency judgment

Hi all

Widower received Deficiency notice (for deceased wife’s car that he let be repo’d after her death).  Plan to notify auto company that widower will qualify for $125k Spousal Award in lieu, so no $$ to pay deficiency, and suggest they release it in exchange for small % check; if we have to go to court for actual Award, will be no $$ left..

Questions:  
Is there a certain kind of documentation needed regarding a Deficiency confirming it is satisfied and gone? 
also, any advice on this approach?

Melinda

Misspelled from my iPhone, which spells as it pleases and is not grammar correctly.

Melinda K Grout
PO Box 1360
Monroe, WA 98272
(360) 794-4322. Tel
(425) 744-6745. Fax

Notice:  This message is intended only for the addressee, and may contain confidential and/or privileged information.  




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