1099 (Forgiveness of Debt) Issued, Can Lender Still Try To Collect

My Sellers were sent a 1099 (Forgiveness of Debt) in March 2010 on a second loan for the full amount of the 2nd loan.

They filed with their tax returns. 

 

We are now short selling the property, and the second lienholder is telling me Seller have to complete short sale process. 

 

Can lienholder try to collect after issuing 1099?

 

thank you

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Evelyn  - More background for the group - Why was a 1099 issued in March 2010?  Did the seller "settle" with the second lienholder then?

Thank You Wendy, The 2nd  lienholder told me they "thought" the property had foreclosed.

Evelyn - I would advise the sellers to contact an attorney.  

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