Is North Carolina a non-recourse state?

[Mindy Jensen]

A friend bought a piece of land at the height of the market. It is now worth almost nothing. He would like to have this monkey off his back, but doesn't know how to proceed.

It is mortgaged, and he would like to simply give it back to the bank. A friend of his bought in this same development, and went into foreclosure. The bank gave him a 1099. Is this a normal procedure in NC?

Thanks!

[Jay Hinrichs]

@Mindy Jensen  non recourse and a 1099 are completely different things.

I think what your asking is does this state allow for a deficiency judgment on a purchase money deed of trust or mortgage I think that's your first question or what your trying to figure out.

Most states do however west coast state like CA WA OR NV AZ do not if its OWNER OCC and it was purchase money.. Purchase money being a loan that purchased the home originally not a refi or a second.  Said home owner can walk and the lenders only recourse is the asset this is what led to the strategic default scenarios in AZ NV and CA 

The fact that this is LAND then I would say the bank can sue for a deficiency and get one from the buyer.  And then chase them through collections purgatory.

The 1099 your refer to is the 1099 C you get which is forgiveness of debt.. Now during the crisis the lenders put a moratorium on issuing the 1099C to any owner occ. and many others as they were just over whelmed.. but these as you note that the other person got one.. the banks are now issuing them.

what this does is tells the IRS you got debt relief and said amount of debt relief then become ordinary income and you must pay tax on it.. OUCH to the extreme.

And if the bank goes for the deficiency then they don't issue the debt relief since they did not relieve you of debt.

Now how do you get out of the 1099 C there is an IRS form that you fill out or your tax man or woman that says at the time you got the 1099 C you were for all intense an purposes insolvent.. IE BROKE... and of course to lie about that to the IRS is not wise.. but if your broke and you get a 1099C you just file the form and you do not owe income tax.

but if your a high wage earner who just is sick of the property and is not broke then your going to get taxed on the debt relief.

hope this helps