Yikes! Now what??

What, regarding to the car did your divorce agreement say? If it stipulated that he keeps the car AND also remains SOLELY reponsible then you shouldn't worry. Make a copy of the divorce agreement if there is such a stipulation, and send it to the OC and the CA. If they give you the runaround and insist on you paying haul your ex back into divorce court.

 

By the way, when was it repo'd? And what state are you in? Think of the SOL

 

Unfortunately "verbal agreements" don't carry any weight. The title and the loan remained in both of your names. Obviously the OC and the CA can't get him to pay, so they're coming after you.

 

Not true. The divorce decree isn't worth the paper it's written on when it comes to the legality of debts with the creditor. Even if the divorce decree says one person is responsible for the car debt, if the OC won't remove the name (and they don't have to), then the other person is liable as well.

What the divorce decree DOES allow you to do is then sue the other party (the ex) for the money and obtain a judgment. Won't do anything to your credit reports.

I know this from personal experience. While the ex is liable to you, you are still liable to the creditor. The divorce court cannot change the terms of the contract with the creditor.

 

What is the SOL in your state?

 

SOL usually starts ticking the first date the account became delinquent for the last time (if the account was caught up again the delinquency doesn't count--the only one that counts is the last one that continued indefinitely and up until present day).

There is the potential that something one or the other of you did or didn't do tolled the running of the SOL clock for some period of time. There is, even more distressingly, the possibility that one or the other of you did something to start the SOL clock running again from zero at some point.

These situations are rare, however. In most cases the SOL starts ticking and keeps on ticking without interruption. You need to know what tolls in your state, and what can restart.

Collectors love to claim that something tolled or restarted the SOL. Sometimes they are using an argument that wouldn't work in your state, other times they are claiming a phony fact that never happened (like a "phantom payment") that would have tolled or restarted the SOL in your state.

 

You need to find the statute section for TX that covers SOL for auto loans. It may be grouped with the others, or it may be under "secured transactions" in TX's version of the UCC (it will come last--the UCC drafters put the SOL last in the various sections of the model act so that they can be severed by legislatures in states where the SOLs are all kept together somewhere else in the statute books).

Once you have that, you may be able to see that the tolling and restarting provisions are there, or nearby in another section or subsection.

At that point you can do research to see what cases mention those statute sections, or you can just go to an annotated version of the statute books to see blurbs that ID those cases. Once you have pulled and read the cases, you shepardize them to make sure they're not overruled or questioned or distinguished a lot and then you know that they're good law unless the statute changed in some major way after they were rendered (and that shouldn't happen because if a major change occurred the annotated would no longer carry the case as a case construing that bit of statutory law).

Or you can just assume that this long after the repo it's dead done and gone.

It may be better strategy to just cavil over this that and the other thing, never outright refusing to pay or invoking the SOL (unless and until you're sued). Your key goal at this point is not so much to avoid being sued or even to avoid negative credit reporting (because that can't hang around for very long unless they illegally "reage" the reporting--and you could sue them for that if they did it). The key is to avoid having them issue a form 1099-C forgiving the debt to the IRS. The best way to avoid that is to have them be unsure whether you even owe. They can't forgive something they can't adequately prove you owe.

In order to prove what you owe, they need to prove what the balance was on the account when the car was repoed, what they sold the car for and that the sale was arm's length and on commercially reasonable terms and they need to prove reasonable expenses if they want to add them to the balance. And they typically also need to prove that they complied with some notice provisions or the deficiency is lost to them right then and there. The contract may also give them collections costs ... but again, all of that is theirs only if it's within SOL and they come to court with all of that. Your goal though is to keep that SOL argument from needing to be made so that a 1099-C won't be triggered.

Meanwhile, XH may pay them. That would lift the burden entirely from your shoulders. Heck, he may already have paid them ... they could easily be trying to defraud you by double-collecting. It may not be comfy contacting XH, but you should probably do it just to learn what's what. You may want to put up a united front. And if the 1099-C turns out to be inevitable, each of you should get one for half the amount--the creditor may improperly try to issue 2, each for the whole amount.

Oh ... blowing those notice provisions would also mean that the 1099-C would have needed to be issued in some long-ago tax year (and shouldn't be issued now). The tax year would have been before 3 years ago, so the IRS can't go back and assess. Don't let them issue you one in the current year if they didn't comply with notice provisions.

 

Cornell has a great site:

Uniform Commercial Code

 

1099-c is when you settle for less then what you owe they will list it as income on your taxes.

 

It need not be the result of any payment by the debtor.

A creditor who holds paper that passes the applicable SOL date, or who hasn't attempted to collect in the last 36 months must also issue a 1099-C form according to the regs' definitions of an "identifiable event" (a triggering event). A loss in court by the creditor for whatever reason can also trigger the need to issue a 1099-C.

 

It means you will owe tax at your marginal rate on whatever amount they put on the form.

Unless you can file a form 982 to partially or wholly avoid recognizing that "phantom income" (it's not really phantom -- you received the money or goods or whatever a long time ago, only now it's income because you're not going to be paying it back).

 

Thanks flacorps so much to learn but through you and the others i've gone from a score of 497 to 616 in about a year and things are looking better.