During the entire six month process of short-selling our home, we knew the realities that it could fall through, that the two banks might not agree to it, or that the buyer might change his mind. When we finally did sign the documents, we were told that we would be responsible for the shortage. And that even if the bank did cancel the debt, we may be taxed on the canceled debt as income received.
At this time of year, you are no doubt getting some form of 1099 in the mail. Their purpose is to determine your liability for taxes due. We just got our 1099-C from the short sale of our home. The final line states, "Total Amount of Debt Canceled: ______".
Total amount of debt canceled. Those words sound so sweet. I was instantly reminded of another moment in my life when all my debt had been canceled. The moment I received Christ as my Savior. Romans 6: 23 says that "the wages of sin is death, but the free gift of God is eternal life in Christ Jesus our Lord." Did you catch that? Free gift.
We entered the 1099-C into our tax form and got a message that says it does not affect our tax liability and we will still enjoy our tax return. God not only canceled our debt, but also let us enjoy a reward. "But now having been freed from sin and enslaved to God, you derive your benefit, resulting in sanctification, and the outcome, eternal life." Romans 6:22.
Total amount of debt canceled: eternal death. Reward: eternal life.