DI could you break that down a bit more in "layman" terms.... 
"Trying to enjoy me next 30 years---DEBT FREE!""
When I grow up I wanna be a GURU!!
@lady_texan wrote:DI could you break that down a bit more in "layman" terms....
Example:
You owe CA $10,000
You agree to pay $4,000 / CA agrees to accept $4,000 and you don't owe them any more money / They forgive $6,000 of your debt
They send a tax form to you and to the IRS that says they forgave/charged off $6,000
That $6,000 is counted as income to you
When you file taxes, you owe income taxes on that $6,000
Ohhhhhhh...wooooow just another way to get you when you are not "paying" attention 
Thank you for the clarification.
"SOOOOOO close to enjoying my NEXT 30 years---DEBT FREE!"
When I grow up I wanna be a GURU!!
Honest mistake. I think they meant OC.
@guiness56 wrote:
A CA can not issue 1099Cs.
What prevents them from doing so?
A charge off is not "forgiven" debt. It is merely an accounting procedure which in no way prevents them from attempting to collect the amount.
For example: AMEX will charge off a bad account. 10 years later when Joe Bloe wants another card, they will require payment from the previously CO account before they will consider it. Once they collect the money, they enter the credit on the books which now becomes a taxable event to them, since they originally took a write off.
A forgiven debt is one in which is agreed by the debtor and creditor that a debt is satisfied in full for an amount less than originally owed.
Because the debtor "borrowed" the original amount, but did not return it, that advance is now considered income because they received money which no longer has an underlying debt against it.
If an OC charges off a debt and then sells it to a CA/debt buyer, the CA owns and is legally entitled to collect the full amount of the debt....the debtor literally owes the full amount to the CA. There are different rules of collecting the debt between OC and CA, but the debt itself (unless beyond SOL) is fully enforceable by judicial action same as the OC could have.
If the CA accepts a settlement amount for less than owed, I don't see a legal reason that would prevent them from issuing a 1099 if they were so inclined, though I don't believe most are so inclined.
What legalilty would prevent them from issuing the 1099? Generally once an OC CO's the debt and sells it to CA, they don't always even keep the records. And they won't later coordinate with a CA on what was collected in order to issue a 1099 (unless they assigned the debt vs. selling it).
I am not arguing this point, BTW, I am just curious why a CA would be prevented from doing it?
@Anonymous wrote:
@guiness56 wrote:
A CA can not issue 1099Cs.
What prevents them from doing so?
A charge off is not "forgiven" debt. It is merely an accounting procedure which in no way prevents them from attempting to collect the amount.
For example: AMEX will charge off a bad account. 10 years later when Joe Bloe wants another card, they will require payment from the previously CO account before they will consider it. Once they collect the money, they enter the credit on the books which now becomes a taxable event to them, since they originally took a write off.
A forgiven debt is one in which is agreed by the debtor and creditor that a debt is satisfied in full for an amount less than originally owed.
Because the debtor "borrowed" the original amount, but did not return it, that advance is now considered income because they received money which no longer has an underlying debt against it.
If an OC charges off a debt and then sells it to a CA/debt buyer, the CA owns and is legally entitled to collect the full amount of the debt....the debtor literally owes the full amount to the CA. There are different rules of collecting the debt between OC and CA, but the debt itself (unless beyond SOL) is fully enforceable by judicial action same as the OC could have.
If the CA accepts a settlement amount for less than owed, I don't see a legal reason that would prevent them from issuing a 1099 if they were so inclined, though I don't believe most are so inclined. I would guess it's because the CA buys debt for the amount less than what was originally owed so in most cases even when the CA accepts a lesser amount they are still making money.
What legalilty would prevent them from issuing the 1099? Generally once an OC CO's the debt and sells it to CA, they don't always even keep the records. And they won't later coordinate with a CA on what was collected in order to issue a 1099 (unless they assigned the debt vs. selling it).
I am not arguing this point, BTW, I am just curious why a CA would be prevented from doing it?
Starting Score: 659
@Anonymous wrote:
@guiness56 wrote:
A CA can not issue 1099Cs.
What prevents them from doing so?
A charge off is not "forgiven" debt. It is merely an accounting procedure which in no way prevents them from attempting to collect the amount.
For example: AMEX will charge off a bad account. 10 years later when Joe Bloe wants another card, they will require payment from the previously CO account before they will consider it. Once they collect the money, they enter the credit on the books which now becomes a taxable event to them, since they originally took a write off.
A forgiven debt is one in which is agreed by the debtor and creditor that a debt is satisfied in full for an amount less than originally owed.
Because the debtor "borrowed" the original amount, but did not return it, that advance is now considered income because they received money which no longer has an underlying debt against it.
If an OC charges off a debt and then sells it to a CA/debt buyer, the CA owns and is legally entitled to collect the full amount of the debt....the debtor literally owes the full amount to the CA. There are different rules of collecting the debt between OC and CA, but the debt itself (unless beyond SOL) is fully enforceable by judicial action same as the OC could have.
If the CA accepts a settlement amount for less than owed, I don't see a legal reason that would prevent them from issuing a 1099 if they were so inclined, though I don't believe most are so inclined.
What legalilty would prevent them from issuing the 1099? Generally once an OC CO's the debt and sells it to CA, they don't always even keep the records. And they won't later coordinate with a CA on what was collected in order to issue a 1099 (unless they assigned the debt vs. selling it).
I am not arguing this point, BTW, I am just curious why a CA would be prevented from doing it?
Junk debt buyers file 1099C not regular CAs.