Credit Card Center Advertiser Disclosure†
06-12-2013 05:47 PM
If your account goes into a charge off and the creditor adds 6 years of interest and penalties are you liable for the entire amount you did not pay including the interest and penalties past the charge off or just the original charge off amount minus what you paid to settle?
06-12-2013 07:05 PM
That depends on what is on the 1099-C. They can report all interest accured in a separate box than the principal amount. If they only report the principal, and you pay taxes on it, I am not sure they could actually try to collect anything else from you on a debt that was forgiven and no longer exists.
Have you read about the 1099-C on the IRS website?
06-12-2013 08:16 PM
First thanks for the help. The debt is not forgiven yet. I should have been more specific. They debt still has two more years to go on my credit. DoFD was 6/2008. I was past SoL though for being sued at least though.
I had to take care of this debt before I could move forward with a home purchase. "If I waited another two years who knows what home prices and interest would be by then." It was a huge mess. It was fraud and the bank even acknowledged that but the bank could care less because they said in the fine print of my contract that I could not sell "the boat" without asking permission from the them first. So that made me still liable.
The actual amount from what I am going to settle vs. the original CO amount difference is $16k. I can deal with that. Its just on top of that they added another $17k in interest and bullcrap that is what I am worried about getting added to the 1099c.
06-12-2013 08:28 PM
Got it. I found this on the website:
The 1099-C may or may not include interest. IRS instructions state that including interest on the form is optional. The same is true of “nonprincipal amounts” such as penalties, fines, fees, and administrative costs. It is up to the lender whether to include those. If they are included, you may or may not have to pay taxes on that amount. According to the IRS, “Whether the interest portion of the canceled debt must be included in your income depends on whether the interest would be deductible if you paid it.”
Forums posts are not provided or commissioned by FICO. Forums posts have not been reviewed, approved or otherwise endorsed by FICO. It is not FICO's responsibility to ensure all posts and/or questions are answered.† Advertiser Disclosure: The listings that appear on myFICO are from companies from which myFICO receives compensation, which may impact how and where products appear on myFICO (including, for example, the order in which they appear). myFICO does not review or include all companies or all available products.
* For complete information, see the terms and conditions on the credit card issuer’s website. Once you click apply for this card, you will be directed to the issuer’s website where you may review the terms and conditions of the card before applying. While myFICO always strives to present the most accurate information, we show a summary to help you choose a product, not the full legal terms - and before applying you should understand the full terms of products as stated by the issuer itself.
IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more
FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.