My question involves real estate located in the State of: California.

I lost my primary residence to foreclosure in early 2015. We had two purchase money loans from two lenders, making it non-recourse per CA law (or so I understand). My trouble is now with the IRS and CA.

The second / junior lender was wiped out by the foreclosure. They sent me a 1099-C that has only Boxes 1, 2 , 4 filled, and the checkbox on Box 5 (Buyer personally liable for repayment of debt) is checked. Box No. 4 simply says MORTGAGE, while Box No. 2 lists about $100,000.

Box 7 (Fair Market Value of the property) IS LEFT EMPTY. I presume this was because they did not see a DIME when the senior lender foreclosed, but is this accurate ? Can they leave this box blank just because they did not see any money when my house was auctioned off by the senior lender ?

I ask because this has resulted in me owing around $35,000 in federal taxes and $11,000 in state taxes. I say "me" because even though my spouse and I jointly borrowed this loan to purchase that property, this 1099-C is only in my name ! Or maybe my spouse will receive one shortly ?

I will be going to a local CPA, but in the meantime would appreciate help from the knowledegable people here. I need peace of mind. If we had $45,000 lying around, we wouldn't have been in foreclosure in the first place. We are afraid to contact the lender to ask about correcting this because we are now worried about them maybe legally pursuing us if we call them and say anything about this debt (they have not contacted us at all since the foreclosure and we don't want to reset any timelines or anything). What are our options ?

Please help.