# How does the law deal with someone paying a debt on my behalf? **URL:** \ **Category:** Factual Questions\ **Created:** [February 10, 2006, 2:08pm UTC](https://boards.straightdope.com/t/how-does-the-law-deal-with-someone-paying-a-debt-on-my-behalf/343857 "2006-02-10T14:08:37Z")\ **Posts on this page:** 7\ **Page:** 2
**Author:** ![aahala](https://avatars.discourse-cdn.com/v4/letter/a/a88e4f/32.png) [@aahala](https://boards.straightdope.com/u/aahala)\ **Post date:** [February 10, 2006, 5:41pm UTC](https://boards.straightdope.com/t/how-does-the-law-deal-with-someone-paying-a-debt-on-my-behalf/343857/21 "2006-02-10T17:41:37Z")
IANAA I believe in this situation the people who have paid your mortgage will want their money back. If so, I doubt the mortgage company will simply reach into their pocket and reimburse. If they haven’t released your loan from the real estate records, then the correction may come by charging back the false payments against your loan. You may have some hassle from the IRS in order to correct your tax matters. Under such a situation, it’s not really income to you, it’s a bookkeeping mistake that needs to be corrected. If it’s not corrected then it’s income to you. Since your tax rate is under 100%, then you benefit. Funding the payment of the tax may be an issue, but this series of events is a net positive to you. ---
**Author:** ![Balthisar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/balthisar/32/2825_2.png) [@Balthisar](https://boards.straightdope.com/u/Balthisar)\ **Post date:** [February 10, 2006, 5:50pm UTC](https://boards.straightdope.com/t/how-does-the-law-deal-with-someone-paying-a-debt-on-my-behalf/343857/22 "2006-02-10T17:50:50Z")
> [@Shagnasty](#): > > You can’t pay it in advance? What kind of mortage is it? Whoosh! ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [February 10, 2006, 6:24pm UTC](https://boards.straightdope.com/t/how-does-the-law-deal-with-someone-paying-a-debt-on-my-behalf/343857/23 "2006-02-10T18:24:32Z")
> [@Fuel](#): > > So, if I was purposely “poor” for a while (got fired from a job) for the sake of taking advantage of insolvency, I _could_ get “income” which is tax-free (“sometimes”)? NEVER! This would mean that I could buy a ton of productive assets on credit, get fired from my job and have unemployed status for a year or so, while working and using these assets under the table for those years to meet my living expenses, and have all these people I am working for during this time _send their payments to my credit card company_ over and above my insolvency so that I am not liable for their gifts!!! > > This would be impossible because, as we all know, there is no way around paying taxes, so AGAIN, how does the IRS deal with this? No. That would be taxable income. But IF someone \*who you owed money to \* decided to “forgive” part of that debt, and IF you were insolvent, it COULD be non-taxable. There are lots of ways around paying taxes. For example, if your boss give you free or reduced rent as you MUST live on those premises to do your job- the FMV of that is not taxable. If your employer pays your health insurance for you- very common- that’s not taxable. Interest on certain State or Municipal bonds- generally non-taxable. Combat pay- tax free. Damages in a lawsuit for personal injury- generally tax-free. Some Fellowships & Scholarships, certain fringe benefits, the Gain on sale of your personal residence (depending), Life inurance proceeds, Some Social Security benefits- and much more- are often Tax-free. ---
**Author:** ![Shagnasty](https://avatars.discourse-cdn.com/v4/letter/s/9dc877/32.png) [@Shagnasty](https://boards.straightdope.com/u/Shagnasty)\ **Post date:** [February 10, 2006, 6:24pm UTC](https://boards.straightdope.com/t/how-does-the-law-deal-with-someone-paying-a-debt-on-my-behalf/343857/24 "2006-02-10T18:24:34Z")
> [@Balthisar](#): > > Whoosh! We were talking about some pretty obscure situations. I was trying to think if you could get back at an enemy by paying a debt for them. You might under really specific conditions. ---
**Author:** ![Tyr](https://avatars.discourse-cdn.com/v4/letter/t/e56c9b/32.png) [@Tyr](https://boards.straightdope.com/u/Tyr)\ **Post date:** [February 10, 2006, 8:19pm UTC](https://boards.straightdope.com/t/how-does-the-law-deal-with-someone-paying-a-debt-on-my-behalf/343857/25 "2006-02-10T20:19:40Z")
I don’t know what exactly would happen in this situation but assuming that Blalthisar has a 30 year mortgage that he got 2 years ago there could be a pre-payment penalty for paying it off in less than x years. This has become fairly common because of a trend toward refinancing every couple of years to take advantage of riseing home values. Perhaps and expert could elaborate on what would happen in this situation? I am not a mortgage broker, but my dad is, so I have picked up on a few things. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [February 10, 2006, 8:32pm UTC](https://boards.straightdope.com/t/how-does-the-law-deal-with-someone-paying-a-debt-on-my-behalf/343857/26 "2006-02-10T20:32:32Z")
> [@Balthisar](#): > > Whoosh! This is GQ, dude. Not MPSIMS. :rolleyes: Dudes wasted valuable time trying to figure out your problem and/or help you. ☹ ---
**Author:** ![Gfactor](https://avatars.discourse-cdn.com/v4/letter/g/9de053/32.png) [@Gfactor](https://boards.straightdope.com/u/Gfactor)\ **Post date:** [February 10, 2006, 8:35pm UTC](https://boards.straightdope.com/t/how-does-the-law-deal-with-someone-paying-a-debt-on-my-behalf/343857/27 "2006-02-10T20:35:25Z")
> [@.Tyr.](#): > > I don’t know what exactly would happen in this situation but assuming that Blalthisar has a 30 year mortgage that he got 2 years ago there could be a pre-payment penalty for paying it off in less than x years. This has become fairly common because of a trend toward refinancing every couple of years to take advantage of riseing home values. Perhaps and expert could elaborate on what would happen in this situation? > > I am not a mortgage broker, but my dad is, so I have picked up on a few things. Well, assuming the person called for a payoff (which is what one would do if they wanted to pay off the entire mortgage) the prepayment penalty would be included in the payoff. If somebody just sent a bunch of money to the mortgage company (guessing at the balance), the company might assess a prepayment penalty because large payments (maybe 20% of the loan balance or more) are treated like early payoffs. So at worst, the mortgage company would tack on a bit to the greatly diminished balance. He’d still be better off. [Previous page](https://boards.straightdope.com/t/how-does-the-law-deal-with-someone-paying-a-debt-on-my-behalf/343857.md?page=1)