Does Sending 1099 To Bankruptcy Debtor Violate Automatic Stay?

A bankruptcy attorney called me today with a question. He represents a Chapter 7 bankruptcy debtor who lost a house to foreclosure. The debtor listed the mortgage company on his bankruptcy petition. The debtor received his bankruptcy discharge in 2008. The mortgage company sent the debtor an IRS From 1099 representing imputed income for forgiveness of the mortgage debt. The attorney believes that sending the 1099 may be a violation of the automatic stay, and he asked me if I agree with his argument.

I don’t think the 1099 violates the bankruptcy stay. The bank probably is required to send a 1099 if it wants to deduct the loss. The debtor has no imputed income, with or without the 1099, because the bankruptcy filing exempts the debtor from imputed income due to debts discharged in bankruptcy. I do not think sending a 1099 to a debtor, which form has not adverse impact on the debtor, is an action against the debtor to collect a discharged debt. My attorney friend, on the other hand, suggests that sending the tax form to the debtor is a continuation of the creditor’s legal process against the debtor and is, therefore, a stay violation.

Please let me know if you have an opinion.

posted by Jonathan Alper, bankruptcy and asset protection attorney, Orlando, Florida    

Comments

[Michael]

For what it's worth, any post-discharge communications do not violate the automatic stay of section 362 because the Stay dissolves at discharge. Consequently the question is more properly addressed as a violation of the discharge injunction found in section 524.

[manny singh]

We had a similar situation but with a credit card 1099. I wrote to the bank that issued it, saying it may be a violation of the automatic stay and they reversed it immediately.

[Credit Debt Relief]

That sounds right. Thanks.