A process server must always comply with the service of process rules as contained in section 308 of the CPLR (Civil Practice Law and Rules). Generally, a process server will serve a homeowner as a named defendant in a foreclosure summons and complaint by way of three means: 1. In hand delivery (the preferred choice), 2. substituted service on a person of suitable age and discretion (a person residing with you) or 3. nail and mail (the least preferred choice of the three). There are other less common methods of service which I will not discuss for purposes of simplicity. Each of the three methods of service mentioned require the process server to file an affidavit of service with the county clerk's office. Nail and mail service generally means that the process server tried to serve you or someone of suitable age and discretion at the property where your reside, but was unable. The standard generally requires that if the process server cannot effectuate in hand service or substituted service after three attempts, usually on three separate days and at various and reasonable times of day and/or evenings, then the process server can serve you utilizing the nail and mail method of service. This essentially means that if the process server made three reasonable attempts at serving you, but was unsuccessful then s/he can tape the foreclosure summons and complaint to your front door or leave it somewhere conspicuous near the door and within 20 days s/he must mail an additional copy of the foreclosure summons and complaint to your residence. The envelope containing the foreclosure summons and complaint must not indicate it is from an attorney's office and only indicate "personal and confidential" on it. The process server must then file the affidavit of service within another 20 days from the date of mailing. In your case, it appears that the process server may have chose the nail and mail approach, but I can't be sure until the affidavit of service is reviewed. If the affidavit of service indicates that the summons and complaint were served personally on you, via in hand delivery or via substituted service on someone residing with you, then it would appear that the service may be what is commonly referred to as "sewer service". If this is the case then you would be able to contest the service. An experienced New York foreclosure attorney can review your service and provide guidance on the best way to proceed. Call my office, and I will be happy to provide you with a free consultation. Best regards, Arnold M. Bottalico, Esq.
The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence-sorry no investment properties! Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. This law applies to modifications with principal reductions and to short sales. Unfortunately, this law only applies to debt forgiven in calendar years 2007 through 2014. More information can be found in IRS Publication 4681 or see: http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation-
So let's say in 2015, you are granted an affordable home mortgage modification that includes a significant principal reduction or that you are granted a short payoff and your loan servicer sends notification 1099-C to the IRS that it has cancelled part of the mortgage debt. Unless the government extends the sunset provisions of the Mortgage Debt Relief Act, you will have to include the cancelled amount as income-so much for an affordable home mortgage modification or for a short sale! So you may have thought you hit the jackpot to only learn that you have to pay it back, this time to Uncle Sam. Fortunately there are some exceptions that can prevent this cancellation of debt from being deemed income. The major exception is if you are deemed insolvent at the time of the cancellation of the debt. Insolvency is essentially when your debts exceed the value of your assets. For example, if you have $100,000 in assets but have $150,000 in debt then you are deemed insolvent by $50,000. Assume further that at the time of this insolvency, the bank is waiving $60,000.00 of debt; consequently, you would have to include $10,000.00 in your gross income for the year the discharge occurred ($60,000-$50,000). Another exception is a discharge in bankruptcy. A debt discharged in bankruptcy has no income tax consequences to an individual debtor since it is excluded from the debtor's gross income [IRS Code Section 108 (a)(1)(A)]. If you received a discharge in bankruptcy and also received a 1099-C from the loan servicer, then you will need to file with the IRS form 982 with your tax return. This will notify the IRS that the debt was discharged in bankruptcy. Another exception is when the debt is a non-recourse loan, which means that you are not personally liable for the debt and the creditor can only enforce his or her rights against the property used to secure the debt. Home mortgages, however, are typically recourse loans and the bank can sue you personally for what is owed over the value of the security assuming the debt is greater than the value of the property. Not everyone fits into the aforesaid exceptions; there are other ways to prevent a cancellation of debt from being deemed taxable income, but this must be done with great care. As for a deed in lieu or a short sale, the IRS treats these as sales, not as a discharge of indebtedness. Using the amounts above (assume the value of the property is 100K and the only asset), you would have a potential capital gain of $10,000.00. Although this may be deemed a capital gain for IRS purposes, you may be eligible for the Home Sale Gain Exclusion. This tax break permits you to exclude up to $250,000.00 in capital gains and up to $500,000.00 if married and filing jointly. In order to be eligible, you must own and occupy the property as your primary residence for at least two years during the last five years prior to conveying the deed in lieu or closing on the short sale. See IRS Publication 523 for a detailed explanation: http://www.irs.gov/publications/p523/ar02.html
Below is an excellent article written by the creators of Turbo Tax: https://turbotax.intuit.com/tax-tools/tax-tips/Home-Ownership/How-to-Avoid-Taxes-on-Canceled-Mortgage-Debt/INF12033.html
Consulting with an experienced New York foreclosure lawyer and tax consultant are highly recommended.
Arnold M. Bottalico is an experienced Long Island, NY foreclosure attorney with over 25 years of experience, and he welcomes your questions and comments.