Capital One Summons...should I settle?

[Anonymous]

Actually, to be strictly technical ... you are required to report *any* amount of forgiven debt, regardless of whether or not it exceeds $600 and regardless of whether or not the creditor files the 1099 ...

[SmartCookie]

Do what you can to see if they will PFD and remove this from your reports, even if it turns out it is set to drop in a year or two.  All derog will be wiped.  Cap1 is just about impossible to GW negative info off of the TL after you've paid it off.

If not though Cap1 usually notes the account as 'settled legally for less than full' which will show a 0 balance.  Has the same impact as if he paid the entire amount.  Doesn't look quite as good on a manual review. 

[Boswd]

yeah that's what I wondering since the settlement is for only $300 less.

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masdeocho wrote:

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Boswd wrote:

Depends.   Is having a paid instead of a settled worth the $300.?    If you settle you won't have to worry about a 1099 I think and if you did it would be nothing really.   $300 is $300 but I can definitly see why you would want a paid in full.  Overall I like it better too

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Creditors are required to file a 1099 if they write off more than $600 of your debt.  It's considered taxable income for the debtor (you) because it's a "forgiveness of debt."  This means you *may* be liable to pay income tax on the amount forgiven, although my understanding is that this does not happen often.

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[BBYGRL]

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Noah_Bodie wrote:

masdeocho wrote:

Creditors are required to file a 1099 if they write off more than $600 of your debt.  It's considered taxable income for the debtor (you) because it's a "forgiveness of debt."  This means you *may* be liable to pay income tax on the amount forgiven, although my understanding is that this does not happen often.

You are right about the $600 limit, but I don't believe they have any leeway. IRS can be rather, ah, insistent.

In 2004, I settled one and they 1099ed me.

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I settled with a ca in 2005 and they 1099ed me as well. I had to include it in my taxes last year. Uncle Sam considers any forgiven debt "income."

[Anonymous]

They have to 1099 you to move it from one column to another in their 'accounting' - either that or it remains as 'bad debt/uncollected debt' and affects their 'bottom line'.

[Anonymous]

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masdeocho wrote:

Actually, to be strictly technical ... you are required to report *any* amount of forgiven debt, regardless of whether or not it exceeds $600 and regardless of whether or not the creditor files the 1099 ...

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True, but I was only talking about the OC's responsibility to 1099 anything over $600.