Received a 1099-C from Chase cancelling alleged amount of 5K. Never received any communciation from the original creditor or a Collection Agency demanding collection prior to this. 1. What should I do? How do I handle this? 2. What should report on my credit report with the 3 Credit Bureaus? What verbiage will I see? 3. How will this effect my credit? 4. Can the Original Creditor come back and sue me or send to a collection agency to sue me if I accept the 1099-C? 5. Bottom Line, how can I get this situation to work in my favor?
1. Report it as income, 2. Chase should be reporting it as a "charge-off," 3. It won't but, Chase's tradeline will and likely already has, 4. I don't believe so insofar as it has been discharged/negated just as it would have been in a BK, 5. I don't see how you can get this to "work in your favor." If you don't report this as income you run a high risk of getting audited by the IRS inasmuch as this 1099 will be cross-checked (this is how they catch people).
Starting in tax year 2007, the IRS is requiring all creditors, CA's, and JDB who cancel your debt or part thereof to issue the TP a 1099-C. If you have received one, was it accurate? If not, sue the entity that issued the 1099-C. The IRC states: If the total debt forgiven included any amount other than the principal, you have damages and therefore a COA. Use IRS Form 982 www.irs.gov/pub/irs-pdf/f982.pdf to reduce your tax liability.
Only if they the debt has been sold/transferred, otherwise it can stay on the report with a balance. Theoretically, they could still collect the balance, and they would just have to report it as recaptured/reclaimed income.
I would disagree. Once a 1099-C is issued the debt is canceled/discharged. The IRS instructions even say that all remedies must be exhausted. http://www.irs.gov/instructions/i1099ac/ar02.html#d0e404
The official IRS position is that the debt can still be sued on by the holder (say, for instance, the 1099-c was technically required by the lack of collection effort in 36 months) ... the IRS claims that "forgiving" it by a 1099-c should have no impact on state-law collectability. The appellate court in Connecticut begged to differ (you could look it up in a CPA firm's publication called "Tickmarks" that you can find online) ... and I'm sure that other state courts would take the same approach if given the opportunity, no matter how the author of the article felt about the situation...
So are you saying even though I claim this as income as required by law I will still get sued? If the answer is YES, how do I remedy this situation?
By living in Connecticut, or in a state that will agree with what the Connecticut court did (which, by the way, was simply to say that the 1099-c satisfied the requirements of a signed writing to show satisfaction or forgiveness of the debt). YMMV
1099-C from Chase for 5K? Does the verbiage below from the IRS website indicated by '*' state or indicate I can still be sued if I claim the 1099-C amount as income as required by law? Can someone else decifer this for me? thanks I checked the IRS website it states: When Is a Debt Canceled A debt is canceled on the date an identifiable event occurs. An identifiable event is: A discharge in bankruptcy under Title 11 of the U.S. Code for business or investment debt (see Exceptions on this page). A cancellation or extinguishment making the debt unenforceable in a receivership, foreclosure, or similar federal or state court proceeding. 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. 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 â??power of saleâ? in the mortgage or deed of trust is exercised. A cancellation or extinguishment due to a probate or similar proceeding. A discharge of indebtedness under an agreement between the creditor and the debtor to cancel the debt at less than full consideration. 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. ********************************************************** 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: The creditor (or a third-party collection agency) has engaged in significant bona fide collection activity during the 12-month period ending on December 31 or 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. *****************************************************
Perhaps to help clarify here, there are two venues discussed here: 1) Legal and accounting discussion of a discharged debt, and 2) "What could happen"... If the debt has been cancelled, and you received the 1099 for the full amount of the debt, then it is highly unlikely that they will pursue collections. In other words, I strongly doubt they will try to sue for the debt. The "accounting" end of this is that they may still report a "balance" on your credit report for the account. This could be a problem when applying for certain types of credit (i.e. mortgage, HEL, HELOC, etc.). So, legal suit for debt collection is the last thing I think you need to worry about (from the OC). You should try disputing the tradeline as inaccurate and incomplete to see what happens.
Here's a helpful link: http://72.14.205.104/search?q=cache...an+carey+1099-c+trap&hl=en&ct=clnk&cd=1&gl=us
