Declaring Insolvency to IRS

[Kathryn K.]

If someone is insolvent at the time of a shortsale and is issued a 1099 for forgiven debt, does filing insolvency with the IRS affect a person's credit? Does the IRS report to the credit bureaus? It would seem that if one files by the deadline and is technically insolvent, then there is no default of debt because none is technically due. Anyone know about this?

[Steve Babiak]

Go to the IRS website and look up form 982. See links provided below.

http://www.irs.gov/pub/irs-pdf/f982.pdf

http://www.irs.gov/individuals/article/0,,id=179414,00.html

http://www.irs.gov/pub/irs-pdf/p4705.pdf

http://www.irs.gov/pub/irs-pdf/p4681.pdf

http://www.irs.gov/irs/article/0,,id=179073,00.html