1099C questions

If a collection agency sends you a 1099C:

1. What is the amount on the 1099C? The amount of the original defaulted credit card, or the amount the collector paid for the old debt, or the huge amount with the collector's fees and interest?

2. Is the collector required to remove the negative reports on your credit reports when they send a 1009C?

3. Can a collector send a 1099C if they haven't proven the debt is yours?

I believe the collector will send the file back to the original who in turn sends the 1099 C form. Any amount after $600 including all the fees will be considered for settlement.

The negative item will still stay on the credit file under the actual company.

1. The amount of the debt that the creditor forgave. It could be the balance in full if you sent them a CND letter after SOL ran. It could also be the remainder of the balance if you settled with them.

2. No, it stays for 7 years from last payment. If you reached a written agreement with the CA, then you could sue for breach of contract when they fail to remove tradeline.

3. Yes. As long as they believe it is your debt.

1. Any amount of debt forgiven over $600.00 will result in a 1099C.If you can show the Irs you are insolvent,the taxes are forgiven.
2. For reporting purposes the item is removed 7 years from date of first delinquency,not date of last payment.The only thing that would reset that date is to bring the account current again.
3.They must be able to prove it is you because a consumer could dispute this with the Irs and company would have to show them that it is a valid debt.

Here is a little more info provided by the Ftc which explains how data furnishers may report bad debt:

http://www.ftc.gov/bcp/conline/pubs/...s/infopro.shtm

This should put the theory that paying restarts the reporting sol to rest.A person would still need to be careful when paying because it could reset individual state sol for civil actions.

When the SOL expires, is that also the end of the time for a 1099c to be given?

In regards to SOL, it looks like a creditor should only be sending a 1099C specifically for SOL when you use it as a defense in court...

http://www.irs.gov/pub/irs-pdf/i1099ac.pdf


It is interesting to note that the IRS considers a debt to be cancelled if a debtor has not made payment in 36 months, and the creditor has not made and 'bona fide' collection attempts on it...

For some of these old credit cards that are creeping up 5-6 years after the fact, maybe instead of demanding validation of the account, we should quote the IRS and demand our 1099C. For what little effect it would have on your taxes, I'm sure you could use a 1099C as future proof that the account is uncollectible.

Debtcruncher,I am giving you a case number from Pacer that talks about 1099c's and bad debt purchasers.
Case 1:06-cv-00101-CKK
The title is DBA vs Snow

Cajunbulldog, I am impressed with your knowledge of the effect insolvency has on the tax consequences of debt forgiveness. My understanding is that this does not mean bankrupt, but only that a person's liabilities are greater than their assets at the time the debt is forgiven. If you have any more detailed information on this matter, please point me in that direction.

Regarding a 1099C, it is important to note this is a tax document the creditor/owner of the account files with the IRS. If they only send a debtor a copy of the 1099C and do not file it with the IRS, it may be an illegal threat. There are also cases against creditors who filed a fraudulent 1099C, stating the amount forgiven far greater than the actual debt. (probably constitutes a federal criminal offense as well)

Texaslawyer,I got that info from another consumer board and it was checked with http://www.irs.gov/ . Insolvent strictly menas just what you say,debts are more than income and it would burden taxpayer to pay on the forgiven debt.

Thanks to both Texas Lawyer and Cajun, because I have learned from both of you here. And I admit, I never thought till now that these places would have the guts to send out a false 1099C, but then again, nothing surprises me about them anymore...

I am still confused about the dollar amount place on the 1099C. Is it the original amount of the debt before all the fees and interest are added?

No, it is whatever your balance is at the time that is gets "cancelled".

Basically, since the creditor is not able to report that balance as income - then you get to report it as income and pay tax on it. Goverment doesn't care who pays the tax as long as somebody pays it.

Kind of like gambling, if you win big in the lotto or at a cas-ino, the goverment wants their cut. A 1099-C is kind of like the government saying "This is a balance you should have paid, but you didn't... since you didn't have to pay it and the debt was cancelled, you got some free money out of the deal... now pay tax on it."

So if a company like LVNV gives you a 1099C, it will be for their final balance, such as $8000 for an original debt, at the credit card company that was $3000?
That's NOT fair.

Actually, think about it like this:
This is for the amount of the debt that's forgiven, so in the IRS's eyes, it's a gain for the taxpayer, which makes it income. Might not be fair, but that's the way it is....

If that $8000 is a 'legal' balance that accurately depicts the account, then yes. But a company cannot just make up numbers -- that would also violate fdcpa.

$5K is a lot of interest/fees. If the bulk of those charges were added to the account AFTER LVNV bought it, you may have a ligitimate beef...

I would question the ability of LVNV to charge and collect additional interest. The fact that they purchase a debt doesn't automatically give them the right to charge interest as spelled out in the agreement. For LVNV to charge interest, they would need to be licensed as a sales finance agency. If they are merely licensed as a CA, then the interest should stop when they bought they debt. They can usually assess a statutory rate of about 5% without a loan license, but at 5% on $3k would amount to $150/year only.