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  1. #1
    debtmonkey is offline Newbie
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    1099-c Cancellation of debt on an un-repossessed car?

    Ok, here is the situation, any help or pointers to the right resources to look up the info myself greatly appreciated.

    Somewhere around seven or eight years ago, I lost my job and had to move back out of state for a while, I didn't have much credit to speak of, just a couple of low limit credit cards and a car loan.

    I held on to the car and kept up the payments at first, then fell behind for a while, then caught back up, then my financial situation broke down to the point that I just stopped paying them. The advice I was given (and for all I know it was the wrong advice) was to just put the car in storage somewhere until I was back on my feet and could negotiate something with the loan company, since otherwise it would get repo'd, sold off for a small amount, and I'd still owe almost the whole amount but with no car to show for it.

    Fast forward to today. I got a 1099-c form stating a cancellation of debt for the amount of the loan. I didn't get any other sort of paperwork, just an IRS form with no real clue of what to do. I've done the basic research, it would seem that the loan has been canceled leaving me with a tax liability and the loan company with a writeoff, so far I'm clear enough.

    What I'm completely unsure of is the status of ownership of the car itself and any further debt collection in regards to it. Everything I've been able to find talks about these cancellations of debt being common after a car is repossed, but this one never was, and it would appear that the canceled debt is the full amount I owed on the car.

    So what happens now? All I can really tell for sure is that I owe the IRS taxes on the amount since it's being canceled, but what does that cancelation actually mean? Can they still attempt to collect on the debt and/or repossess the car even while canceling the debt and reporting it as income?

    Answers are helpful, but even some pointers of where to look for concrete information would be really welcome.

    Thanks in advance

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  3. #2
    debtmonkey is offline Newbie
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    Well, I had figured that this might be an unusual question, so the lack of an answer isn't that big of a surprise.

    Does anyone have any recommendations for where I might start looking for the information I need? Even something that just explains clearly what a cancellation of debt means would help.

  4. #3
    cap1sucks is offline Senior Member
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    Quote Originally Posted by debtmonkey View Post
    Ok, here is the situation, any help or pointers to the right resources to look up the info myself greatly appreciated.

    The advice I was given (and for all I know it was the wrong advice) was to just put the car in storage somewhere until I was back on my feet and could negotiate something with the loan company, since otherwise it would get repo'd, sold off for a small amount, and I'd still owe almost the whole amount but with no car to show for it.
    Another dangerous teacher on the loose. Hiding the vehicle like that can get you a few years in the pokey.
    Fast forward to today. I got a 1099-c form stating a cancellation of debt for the amount of the loan. I didn't get any other sort of paperwork, just an IRS form with no real clue of what to do. I've done the basic research, it would seem that the loan has been canceled leaving me with a tax liability and the loan company with a writeoff, so far I'm clear enough.
    So long as you report the 1099 on your tax return and pay any taxes on it then you are clear enough with the IRS.
    What I'm completely unsure of is the status of ownership of the car itself and any further debt collection in regards to it. Everything I've been able to find talks about these cancellations of debt being common after a car is repossed, but this one never was, and it would appear that the canceled debt is the full amount I owed on the car.
    You should have disputed the debt so as to hopefully keep the IRS from collecting on the tax liability. I don't know whether you can do that or not at this late time. I doubt it.
    So what happens now? All I can really tell for sure is that I owe the IRS taxes on the amount since it's being canceled, but what does that cancelation actually mean? Can they still attempt to collect on the debt and/or repossess the car even while canceling the debt and reporting it as income?
    IRS says they can.
    Answers are helpful, but even some pointers of where to look for concrete information would be really welcome.

    Thanks in advance
    Concrete information? Well, have you tried to sell the car? Probably not. If you did you would find out that they still hold the lien on the vehicle. What you have now is a vehicle you can never sell or junk. There is no way to dispose of it except to cut it up in pieces and sell it to the scrap yard. If you do that they can put you in jail for destruction of their security. If you hide it you can go to jail for that too. If you even go out of state with the vehicle that can land you in jail too.

    You could probably take it somewhere and park it then flatten a tire and let the cops tow it off. They would sell it at public auction as an abandoned vehicle after a while but since it is titled in your name with the finance company as a lien holder they would be likely to notify both you and the finance company that the vehicle had been impounded and will be sold at public auction if the towing and impound fees are not paid by a certain date.

    That will really improve your situation because now they can come after you for the full price of the vehicle. They can take you to court and get a judgment very easily. That would improve your situation too, wouldn't it?? NOT!!!

    Best thing to do is call them up and ask them where they would like you to deliver the car or tell them where it is so they can repo it. An even better thing to do is pay the thing off and get a clear title to it so you don't get a judgment against you or end up with another stone around your neck you really can't ever get rid of.

  5. #4
    debtmonkey is offline Newbie
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    Quote Originally Posted by cap1sucks View Post
    Another dangerous teacher on the loose. Hiding the vehicle like that can get you a few years in the pokey.
    Great. I'm guessing this is something that varies from state to state? Any other info on this aspect would be appreciated, now you've got me worried that there could be legal action out there against me that I just don't know about.

    Quote Originally Posted by cap1sucks View Post
    So long as you report the 1099 on your tax return and pay any taxes on it then you are clear enough with the IRS.
    Well I can report it, but paying taxes, that might be a bit more tricky. At this point I'm going to school, make next to nothing, and was just hit with a 14,000$ tax burden I wasn't expecting, I'm going to need to do some research to see what, if anything, I can do about it.

    Quote Originally Posted by cap1sucks View Post
    You should have disputed the debt so as to hopefully keep the IRS from collecting on the tax liability. I don't know whether you can do that or not at this late time. I doubt it.
    From my understanding, there is basically no way to dispute a secured debt, but credit has never been something I've known much about, so I'm probably wrong here again. Is there anything I should do here, or is it probably late enough not to be worth doing?

    Quote Originally Posted by cap1sucks View Post
    IRS says they can.
    Well that's special. So what is the 1099 about really? They don't expect to get their money, so it becomes my tax burden, but they can still pursue it and get paid even while I'm forced to pay taxes because they won't be paid?


    Quote Originally Posted by cap1sucks View Post
    Concrete information? Well, have you tried to sell the car? Probably not. If you did you would find out that they still hold the lien on the vehicle. What you have now is a vehicle you can never sell or junk. There is no way to dispose of it except to cut it up in pieces and sell it to the scrap yard. If you do that they can put you in jail for destruction of their security. If you hide it you can go to jail for that too. If you even go out of state with the vehicle that can land you in jail too.
    So basically, unlike a credit card, a car loan will follow me to grave until the car itself is somehow dealt with, is that a more or less accurate summary of the situation?

    Quote Originally Posted by cap1sucks View Post
    You could probably take it somewhere and park it then flatten a tire and let the cops tow it off. They would sell it at public auction as an abandoned vehicle after a while but since it is titled in your name with the finance company as a lien holder they would be likely to notify both you and the finance company that the vehicle had been impounded and will be sold at public auction if the towing and impound fees are not paid by a certain date.

    That will really improve your situation because now they can come after you for the full price of the vehicle.
    Ok, maybe I'm not understanding this, do you mean they can demand both the amount of the loan, plus the full value of the car? If the car is disposed of, how does that affect what I owe? The car was hit while parked and the insurance never paid, and to be honest, I got a bad deal on it to begin with, so I'm sure it would be sold for next to nothing, that's part of how I got into this mess to begin with.

    Quote Originally Posted by cap1sucks View Post
    They can take you to court and get a judgment very easily. That would improve your situation too, wouldn't it?? NOT!!!
    Is this something that is likely to happen now? I had assumed that after the seven or so years it's been, they have either already gotten a judgment against me that I was never notified of, or they aren't going to, but is the sudden appearance of the 1099 indication that they will be pursuing the matter further now?

    Quote Originally Posted by cap1sucks View Post
    Best thing to do is call them up and ask them where they would like you to deliver the car or tell them where it is so they can repo it.
    Would this be better than just dumping it? I'm really unclear here, I don't understand how getting rid of the car, or the different ways of doing so will affect what I owe and what can happen next.

    Quote Originally Posted by cap1sucks View Post
    An even better thing to do is pay the thing off and get a clear title to it so you don't get a judgment against you or end up with another stone around your neck you really can't ever get rid of.
    I was a kid when all this started, just old enough to get the loan really, and it's clear that I really made a mess of things. At this point, I'm just trying to figure out how to get out from under it all.

    I know next to nothing about credit, as is probably obvious. That said, from everything I've picked up on this forum while I was trying to find the answer to my question, it looks like I'm at or near the point where these problems will start to fall off my credit report, and maybe I can start to try to sort everything out and build some credit. If I contact them now, is it going to reset that clock, or allow them to come after me again in some other way?

    I'd love to be able to just pay it off and be done with it, but my financial situation doesn't even make that remotely possible, and that's not going to change until I graduate and make some money.

    I'm really at a loss for what to do next. Is getting a 1099 out of the blue after all these years a sign that I should expect further action, or does it have something to do with the fact that the debt is probably about to reach or has just passed the 7 year mark?

    The more I read, the more questions I'm running into, at this point I'm almost completely lost. I'm sorry if I'm being a bother, but I don't know where else to look for help, I've got no money to pay someone for legal advice, and the last time someone I knew tried to help it sounds like they gave me just about the worst advice possible.

  6. #5
    rocket1977 is offline Senior Member
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    Someone gave this person the worst advice I have ever seen.

  7. #6
    cap1sucks is offline Senior Member
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    Quote Originally Posted by rocket1977 View Post
    Someone gave this person the worst advice I have ever seen.
    Then you have not been watching my thread on America's most dangerous teachers?

    We can only hope that he didn't pay big bucks to get it. On the other hand, even if it were freely given how much would it cost him if he ended up spending even one day in jail for hiding the vehicle or driving it across state lines without permission of the lender.

    I've never heard of that happening but the laws are there in most states. Just taking a vacation or going to another state on business isn't going to get anybody thrown in jail but moving to another state without telling the lender might do it.

  8. #7
    cap1sucks is offline Senior Member
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    Quote Originally Posted by debtmonkey View Post
    Great. I'm guessing this is something that varies from state to state? Any other info on this aspect would be appreciated, now you've got me worried that there could be legal action out there against me that I just don't know about.
    The way to quit worrying about it is to call the lender and make arrangements for them to repo the vehicle. I don't like to recommend that. A repo on your credit reports is one of the worst you can get but its better than taking even a remote chance they might throw you in jail.
    Well I can report it, but paying taxes, that might be a bit more tricky. At this point I'm going to school, make next to nothing, and was just hit with a 14,000$ tax burden I wasn't expecting, I'm going to need to do some research to see what, if anything, I can do about it.
    $14,000 in taxes and earning little or nothing?
    From my understanding, there is basically no way to dispute a secured debt, but credit has never been something I've known much about, so I'm probably wrong here again.
    You can dispute any tradeline. How successful you will be is another story. I can tell you that you can't dispute secured debt, bankruptcy, judgments, tax liens, student loans or any other type of listing and before the hour is out somebody will probably post a message saying they did it. Point is you can dispute anything and it might work.

    But what good is it going to do you if they file a lawsuit and get a judgment?
    That's something most credit repair experts don't mention.
    Is there anything I should do here, or is it probably late enough not to be worth doing?
    Get rid of the car. Pay for it or let them repo it. Above all, don't hide it in some storage shed. It isn't doing you any good in a storage shed. That just costs money you could use to get another car.
    it becomes my tax burden, but they can still pursue it and get paid even while I'm forced to pay taxes because they won't be paid?
    That's what IRS says.
    So basically, unlike a credit card, a car loan will follow me to grave until the car itself is somehow dealt with, is that a more or less accurate summary of the situation?
    Not necessarily. Credit history will last just over 7 years if you do nothing about it. During that time it will have less and less impact on your scores. If you get a judgment it will be on your public record at the court house forever.
    Who is going to care? Try buying a house and you might find out. Try getting a good government job and you will find out. Join the military and you will find out too. Some companies won't hire you either until it is paid. That can be true whether you have a judgment or not. You can be fired from government jobs or the military for not paying your debts. Denny's or McDonalds probably don't care but they don't pay much either.
    Ok, maybe I'm not understanding this, do you mean they can demand both the amount of the loan, plus the full value of the car?
    It is possible.
    If the car is disposed of, how does that affect what I owe? The car was hit while parked and the insurance never paid,
    That's not the lenders fault. I saw a case where a really nice car was totaled by a drunk driver who had no insurance and the owner had rejected uninsured motorist coverage. He had to pay the note. I had the same thing happen to me but I never owed any money on the vehicle.
    and to be honest, I got a bad deal on it to begin with, so I'm sure it would be sold for next to nothing, that's part of how I got into this mess to begin with.
    That's not the lender's fault either. That's your fault for buying a junker or paying too much for it. A 1 year old vehicle can be a bad buy. I can go to a car lot and know which cars are likely to be trouble without even starting the engine. Stay away from high mileage cars no matter how new they are. The average driver will put about 20,000 miles a year on a car according to the insurance companies. Shopping for vehicles with less mileage than that will
    be well worth the extra effort it takes to find them. There are other signs to look for too. Buy a cheap vacuum gauge and test drive the car and insert the vacuum gauge into a vacuum line. Step on the throttle and watch the gauge.
    Should be somewhere between 16 and 22 inches of vacuum. Check the oil and water caps to look for white or other discoloration that should not be there.
    Buy a car facts report on the vehicle. If you have a good cellphone you can do that on the spot. Better yet a laptop and a cellphone. No matter how good the cellphone is it works better using it as a dial up modem for the laptop. Plus you get speeds up to about 115K and it won't be long before cellphones will be capable of cable speeds. They are in other countries and will be here in the U.S. soon.
    Is this something that is likely to happen now? I had assumed that after the seven or so years it's been, they have either already gotten a judgment against me that I was never notified of,
    That can happen. Go to your county clerk's office and ask to see your public record. They will show it to you on a computer and you can look for any judgments.
    or they aren't going to, but is the sudden appearance of the 1099 indication that they will be pursuing the matter further now?
    No telling. Maybe they are just complying with IRS law.
    Would this be better than just dumping it? I'm really unclear here, I don't understand how getting rid of the car, or the different ways of doing so will affect what I owe and what can happen next.
    It really makes little difference how it gets repoed. Just so it does. Above all don't try to hide it. Clean it out and give it back. Don't even leave a scrap of paper under the seats, in the glove box or anywhere. The end result will be the same. The best advice is pay it off and avoid the repo even if it is a totaled out wreck. If it was a bad deal to start off with then don't make it worse. If you can't do that then at least don't try to hide it. Give it back.
    I was a kid when all this started, just old enough to get the loan really, and it's clear that I really made a mess of things. At this point, I'm just trying to figure out how to get out from under it all.
    Pay it off or give it back then deal with the consequences later. If you give it back they may not do anything but put it on your credit reports. If you really knew what you were doing you might be able to catch the repo company in a violation of FDCPA or a state law. Yes, repo companies have to obey FDCPA just like debt collectors do. They know that but count on the fact that most people don't know it. They can be trapped into a violation and sued but it isn't easy to do. I can tell you how to do it but actually doing it is neither easy nor practical.
    If I contact them now, is it going to reset that clock,
    Probably not. Depends on state law mostly.
    I'm really at a loss for what to do next.
    Give it back then worry about the rest.
    Is getting a 1099 out of the blue after all these years a sign that I should expect further action, or does it have something to do with the fact that the debt is probably about to reach or has just passed the 7 year mark?
    I can't tell you that because it also depends on state law. I don't know what state you are in. It was a written contract so the SOL to bring a suit might be up and it might not.
    The more I read, the more questions I'm running into, at this point I'm almost completely lost. I'm sorry if I'm being a bother, but I don't know where else to look for help, I've got no money to pay someone for legal advice, and the last time someone I knew tried to help it sounds like they gave me just about the worst advice possible.
    I think I have given you the same advice an attorney would give you. Give the car back and worry about what happens later. Not much else you can do.

  9. #8
    debtmonkey is offline Newbie
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    Quote Originally Posted by cap1sucks View Post
    The way to quit worrying about it is to call the lender and make arrangements for them to repo the vehicle. I don't like to recommend that. A repo on your credit reports is one of the worst you can get but its better than taking even a remote chance they might throw you in jail.
    So does that mean if they get it back now, it will add a new item to my credit report for the repo that will sit there for another 7 years, even as the original negative report was ready to/just has dropped off?

    Quote Originally Posted by cap1sucks View Post
    $14,000 in taxes and earning little or nothing?
    I was referring to the amount of income from the 1099 that I would now be expected to pay taxes on. As for what I'm earning, as with a lot of students, just about enough to keep the bills mostly paid and eat enough food that isn't ramen not to get scurvy.

    Quote Originally Posted by cap1sucks View Post
    You can dispute any tradeline. How successful you will be is another story. I can tell you that you can't dispute secured debt, bankruptcy, judgments, tax liens, student loans or any other type of listing and before the hour is out somebody will probably post a message saying they did it. Point is you can dispute anything and it might work.
    Is that going to have any affect on the 1099 that's already been sent in? Can I dispute that part?

    Quote Originally Posted by cap1sucks View Post
    But what good is it going to do you if they file a lawsuit and get a judgment?
    That's something most credit repair experts don't mention.
    Well, from what I've read here so far, just getting the vehicle back isn't going to do anything to stop them from seeking a judgment on the remaining amount, right? The car would be unlikely to sell at auction for more than maybe a thousand dollars, from what I've seen of auction sales, so them getting it back it going to have little impact on the amount I owe that they could still sue for.

    Quote Originally Posted by cap1sucks View Post
    That's not the lenders fault.
    I'm not trying to shift any blame here, I'm well aware that I was young, didn't do my research, and am left to fix my mistakes now. What I was trying to get across is that the car has almost no value at this point. We are talking about a 11 year old car with body damage and something close to 100,000 miles on it.

    They know the car itself isn't really worth much, which I assume is why they haven't considered it worth the cost to bring it to court and get a writ of replevin to get it back, and they know I have no money and no assets, which might be why they never spent the money to bring it to court and get a judgment, assuming they haven't.

    Thanks for the tips on finding a better car next time, that will come in really handy.

    Quote Originally Posted by cap1sucks View Post
    The best advice is pay it off and avoid the repo even if it is a totaled out wreck.
    There is no way I could pay off the full amount for at least a few years, but is there any point in trying to make a low ball offer to settle it? If not, I won't bother, since I don't have anywhere near the full amount available, but it seems that after all this time, with the car worth next to nothing and with the loan already off or about to drop off my credit report, they might be willing to settle it for a smaller amount.

    Quote Originally Posted by cap1sucks View Post
    Probably not. Depends on state law mostly.
    This was all in California, if that helps. Do you have any suggestions for where to find information on state laws in these matters? For example, from what I was able to look up myself, it seems that in many states it's not illegal to hide it from repo unless they get a writ of replevin, but I don't know if that's the case in this state or not.

    Quote Originally Posted by cap1sucks View Post
    I can't tell you that because it also depends on state law. I don't know what state you are in. It was a written contract so the SOL to bring a suit might be up and it might not.
    Again, this all happened in California. If you don't know the state law there, could you give me an idea of what section of legal code this sort of thing is covered by so I'd have some clue of where to start looking?

    Quote Originally Posted by cap1sucks View Post
    I think I have given you the same advice an attorney would give you. Give the car back and worry about what happens later. Not much else you can do.
    Thanks, I appreciate it. At this point, I guess I'm just trying to get all my information together so I can figure out the best way to do just that.

  10. #9
    keepmine is offline Senior Member
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    Go to the IRS site and type in 1099C in the search box. You'll find an exception to the tax liability is insolvency.
    Got no idea what to do about the rest of the mess.

  11. #10
    cap1sucks is offline Senior Member
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    Quote Originally Posted by keepmine View Post
    Go to the IRS site and type in 1099C in the search box. You'll find an exception to the tax liability is insolvency.
    Got no idea what to do about the rest of the mess.
    Yes, that is correct but also check for what happens to the liability if a debt has been disputed.

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