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 Posted: Mon Jun 04, 2007 12:57 pm Subject: 1099C questions |
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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?
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Guest
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| Posted: Mon Jun 04, 2007 5:19 pm Subject: |
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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.
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Bridget
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| Posted: Mon Jun 04, 2007 5:28 pm Subject: |
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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.
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Morningstar
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| Posted: Tue Jun 05, 2007 5:15 am Subject: |
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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.
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http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm#809
http://www.ftc.gov/os/statutes/fcrajump.shtm
http://www.debtconsolidationcare.com/forums/about216.html
Use this letter to protect your rights under the FDCPA
myfairdebt.com & myfaircredit.com-Good source of case law in forums.
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cajunbulldog
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cajunbulldog
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| Posted: Thu Jun 07, 2007 11:36 pm Subject: |
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When the SOL expires, is that also the end of the time for a 1099c to be given?
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| Posted: Fri Jun 08, 2007 1:41 am Subject: |
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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
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A debt is canceled on the date an identifiable event occurs. An identifiable event is:
1. A discharge in bankruptcy under Title 11 of the U.S. Code for business or investment debt (see Exceptions on this page).
2. A cancellation or extinguishment making the debt unenforceable in a receivership, foreclosure, or similar federal or state court proceeding.
3. A cancellation or extinguishment when the statute of limitations for collecting the debt expires, or when the statutory period for filing a claim or beginning a deficiency judgment proceeding expires. Expiration of the statute of limitations is an identifiable event only when a debtor’s affirmative statute of limitations defense is upheld in a final judgment or decision of a court and the appeal period has expired.
4. A cancellation or extinguishment when the creditor elects foreclosure remedies that by law end or bar the creditor’s right to collect the debt. This event applies to a mortgage lender or holder who is barred by local law from pursuing debt collection after a “power of sale” in the mortgage or deed of trust is exercised.
5. A cancellation or extinguishment due to a probate or similar proceeding.
6. A discharge of indebtedness under an agreement between the creditor and the debtor to cancel the debt at less than full consideration.
7. A discharge of indebtedness because of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt. A creditor’s defined policy can be in writing or an established business practice of the creditor. A creditor’s practice to stop collection activity and abandon a debt when a particular nonpayment period expires is a defined policy.
8. The expiration of nonpayment testing period. This event occurs when the creditor has not received a payment on the debt during the testing period. The testing period is a 36-month period ending on December 31 plus any time when the creditor was precluded from collection activity by a stay in bankruptcy or similar bar under state or local law. The creditor can rebut the occurrence of this identifiable event if:
a The creditor (or third-party collection agency) has engaged in significant bona fide collection activity during the 12-month period ending on December31 or
b. Facts and circumstances that exist on January 31 following the end of the 36-month period indicate that the debt was not canceled.
Significant bona fide collection activity does not include nominal or ministerial collection action, such as an automated mailing. Facts and circumstances indicating that a debt was not canceled include the existence of a lien relating to the debt (up to the value of the security) or the sale or packaging for sale of the debt by the creditor.
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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.
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DebtCruncher
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cajunbulldog
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| Posted: Sun Jun 10, 2007 9:21 am Subject: |
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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)
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texaslawyer
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cajunbulldog
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| Posted: Sun Jun 10, 2007 11:36 am Subject: |
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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...
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kscornell
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| Posted: Sun Jun 10, 2007 6:21 pm Subject: |
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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?
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| Posted: Sun Jun 10, 2007 8:11 pm Subject: |
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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."
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DebtCruncher
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| Posted: Sun Jun 10, 2007 9:45 pm Subject: |
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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.
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| Posted: Mon Jun 11, 2007 12:38 pm Subject: |
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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....
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kscornell
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| Posted: Mon Jun 11, 2007 1:40 pm Subject: |
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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.
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DebtCruncher
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