Strange situation with a 1099C and a Mortgage

Discussion in 'Credit Talk' started by elemenop, Nov 1, 2016.

  1. elemenop

    elemenop New Member

    Hey guys,

    I've searched and searched about this subject and I can't find a good course of action. This is truly a weird situation.

    So I have an old charge off on my credit report. It's back from 2012... well I'm now applying for a mortgage and am in the final stages of approval, but my mortgage company says I need to pay it off. no problem... I called the company to pay them off in full, but they said they wont accept a payment. They said the debt has been forgiven and I can't pay them because they issued me a 1099C.

    I'm not sure how to proceed here. I need them to take my money so I can get this mortgage. How do I do that?

    Please help!
  2. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    Welcome to Creditnet elemenop! And I'm sorry to hear about this predicament you've found yourself in.

    You need to share with the mortgage lender the 1099-C you received. That serves as proof that the debt was officially cancelled, and you may have even had to pay income taxes on it. What kind of debt was the 1099-C issued for?
  3. elemenop

    elemenop New Member

    hopefully that'll work. It's for a credit account. PayPal Smart Connect with Synchrony bank.

    Thank you for taking a look!
  4. jam237

    jam237 Well-Known Member

    Do you remember receiving a 1099?

    Check your tax returns to see if it is listed as income. (If it's over $599.99, it's reportable as miscellaneous income, under most circumstances.)

    If your tax return lists the amount there, they may also accept that as proof if it lists the source on the return.

    How is the debt showing on your report?

    If it was forgiven, it should show as a zero balance, the note may say something about the debt being forgiven, but the lender should know that it would be a major federal violation to take money for an account that they took the money from the IRS.
  5. elemenop

    elemenop New Member

    I do remember receiving a 1099c and I filed. I still have the paperwork.
    here's the info - I hope it's OK that I put this in here... It doesn't really have any identifying info:

    Last Reported Jun 08, 2015
    Creditor Name SYNCB/SMRTCN
    Account Type Credit Card
    Account Status Closed - Derogatory
    Opened Date Jun 26, 2009
    Closed Date Aug 17, 2012
    Limit $900
    Term --
    Monthly Payment $0
    Responsibility Individual
    Balance $1,134
    Highest Balance $854
    Payment Status Collection/Charge-Off
    Worst Payment Status Unknown
    Date of Last Payment Apr 28, 2012
    Amount Past Due $346
    Times 30/60/90 Days Late 0/0/0
    Remarks Charged off as bad debt
    Profit and loss write-off

    So based on this, and knowing that I got a 1099C, is this reporting correctly as far as you can tell?

    What's kind of funny about this is when I call them, they immediately read me a disclosure that says something to the effect of it's past the statute of limitations and I am under no obligation to pay them. If I choose to set up payment arrangements or make any payment, they can sue me for the remainder of the balance. I immediately say, I understand and I'd like to pay it off, and they say "sorry, we can't take a payment".

    Thanks again for looking!
  6. jam237

    jam237 Well-Known Member

    If they 1099ed it, there is a ZERO balance.

    What I would do to hopefully get it resolved as quickly as possible on the report, is:

    Send a letter to the address on your credit report, for the tradeline, letting them know that the tradeline is reporting incorrectly, and needs to be updated to a zero balance. (This step makes sure they know EXACTLY what the dispute they received from the CRAs is about, as opposed to a simple code.)

    When you know they received that letter, send a simple dispute to the three CRAs disputing the account has a balance, when the balance should be zero. (This step locks in the part of the FCRA that is actionable.)

    If they update it, you would be ok.

    If they don't dispute again, but only with the CRAs, they are already on notice what the dispute was. Each time they update each report incorrectly could be $100-1000 in your pocket per report.
  7. jam237

    jam237 Well-Known Member

    The SOL is why they 1099ed it.

    The FTC is enforcing a policy with a lot of creditors and collectors similar to this.

    It's deceptive to take money or do anything that would restart the SOL on a debt, without the consumer being clearly informed of that fact.

    Companies were sending new credit card offers, which would bundle a stale debt into a new account, and on the default for the new account they could sue you for the new account, even though the new account was the old account.

    So companies are wise if the day they know an account is stale to not take a penny without fully advising them of the possible negative impact of paying them.
  8. JoshuaHeckathorn

    JoshuaHeckathorn Administrator

    Have you had any further communication with your mortgage lender regarding the debt? Is it still holding up the lending process, or were they willing to move forward after you shared the 1099-C with them?

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