Did my Bank just give me free money? Debt forgiveness credit on 0 balance HELOC

[Anonymous]

Hello, Sorry this is my first post as opposed to an introduction but something very weird happened. I logged into my First Tennessee bank account in which I  have a savings account, checking account, and a HELOC. The heloc has had a 0 balance for more than a year. They recently lowered my availability from 10k to 7.5k from what I am assuming is not using the account. Anyways, Monday i received a little over 2k as a credit to the account in the form of a "debt forgiveness credit". I called the bank and basically all customer service could tell me was that the bank did an audit and I would receive a letter in the mail explaining why I received the credit. The weird thing about his though is I have 0 debt other than my mortgage, and I never carried a debt on the HELOC. I would pay it off religiously every month. Any help will be greatly appreciated

[Turbobuick]

Debt forgiveness has a bad connotation. Not likely something you want on your credit history. I would wait for the letter and call if anything seems out of the ordinary.

[Anonymous]

thanks turbobuick. I have done some research and kinda concluded the same thing about the debt forgiveness thing on my credit. My fico is 771. I have over 125k in available credit (im a thepointsguy.com junkie) I did find some information about first tennessee having to pay some fines related to mortgages and I recently refinanced my mortgage from 4.25% at 30 to 3.5%. Do you know if this may have any relation?

[thelethargicage]

Expect to get a 1099 from your bank in the mail next year.

[Anonymous]

You'll generally get taxed on it as income on Form 1099C Cancellation of Debt. I believe they do it when it's $600 or more.

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@Anonymous wrote:

Hello, Sorry this is my first post as opposed to an introduction but something very weird happened. I logged into my First Tennessee bank account in which I  have a savings account, checking account, and a HELOC. The heloc has had a 0 balance for more than a year. They recently lowered my availability from 10k to 7.5k from what I am assuming is not using the account. Anyways, Monday i received a little over 2k as a credit to the account in the form of a "debt forgiveness credit". I called the bank and basically all customer service could tell me was that the bank did an audit and I would receive a letter in the mail explaining why I received the credit. The weird thing about his though is I have 0 debt other than my mortgage, and I never carried a debt on the HELOC. I would pay it off religiously every month. Any help will be greatly appreciated

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[Anonymous]

ya thats what ive read. Then again id lov to pay taxes on a free 2k. Wonder what the odds are this is just bank error. 

[Anonymous]

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@thelethargicage wrote:

Expect to get a 1099 from your bank in the mail next year.

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Lol we were typing same response but you beat me to it. 

[Anonymous]

If this is actually forgiveness of some debt, you will likely have to pay taxes on it. However, from your post, it seems like this might just be a mistake on the bank's part or might be a class-action settlement. Wait and see what the letter says. 

[Anonymous]

First horizon owns First Tennessee. I found this article. Am i the unknown winner of a classaction lawsuit? http://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-$110-Million-Settlement-with-First-Hori...

[RobertEG]

Cancelled debt of $600 or more must be reported to the IRS via a form 1099c, but dont simply accept that as fixing your obligation to pay taxes on the cancelled debt.

The tax code provides for exemptions, such as if you can show insolvency at the time of their cancellation, meaning your debts exceeded your assets.

Consult an accountant if you receive a 1099c.