topic Re: What happens when a -c is issued? in General Credit Topics

The Spector of 1099-C After Credit Rebuild?

LegalTender — Fri, 13 Dec 2019 20:08:01 GMT

Seven years ago I was involved with multiple CC defaults due to an emergency. Those debts are now beyond the statute of limitations.

A year ago (at the 6 yr mark) I received one 1099-C and paid the tax on it.

A couple questions:

1) Is there any statutory time limit beyond which a creditor is not required to file a 1099-C?

2) If a debtor has never received a 1099-C (and assuming the creditor never filed one) is there any statutory time limit for Federal or State(NYS) income tax collection from the alleged debtor at which time it's collection enforcement becomes 'stale'?

3) Regarding a bank that a debtor has previously defaulted with, where the debt was never repaid, the defaulted debt is now beyond the SOL, and the bank has never issued a 1099-C to the debtor: is it prudent - after a full credit repair - to approach this same bank to apply for credit again? Is there a risk of triggering the issuance of 1099-C whereas in another scenario the creditor might neglect ever issuing it?

Thanks a bunch for your feedback.

My understanding is that it's a tax requirement on the part of the creditor. However, my understanding is that in a significant number of instances creditors simply do not file the 1099-C for whatever reason(s).

Re: The Spector of 1099-C After Credit Rebuild?

FireMedic1 — Sat, 14 Dec 2019 01:17:43 GMT

@LegalTender wrote:
Seven years ago I was involved with multiple CC defaults due to an emergency. Those debts are now beyond the statute of limitations.
A year ago (at the 6 yr mark) I received one 1099-C and paid the tax on it.

A couple questions:
1) Is there any statutory time limit beyond which a creditor is not required to file a 1099-C?
2) If a debtor has never received a 1099-C (and assuming the creditor never filed one) is there any statutory time limit for Federal or State(NYS) income tax collection from the alleged debtor at which time it's collection enforcement becomes 'stale'?
3) Regarding a bank that a debtor has previously defaulted with, where the debt was never repaid, the defaulted debt is now beyond the SOL, and the bank has never issued a 1099-C to the debtor: is it prudent - after a full credit repair - to approach this same bank to apply for credit again? Is there a risk of triggering the issuance of 1099-C whereas in another scenario the creditor might neglect ever issuing it?

Thanks a bunch for your feedback.

My understanding is that it's a tax requirement on the part of the creditor. However, my understanding is that in a significant number of instances creditors simply do not file the 1099-C for whatever reason(s).

Hope this helps. Dont like seeing posters go unanswered.

"As long as a debt has not been paid or canceled, there’s no statute of limitations on when a lender has to submit a 1099-C. If the lender files a 1099-C with the IRS, however, they have until January 31 to have it in your mailbox. You can receive a Form 1099-C on an old debt at any time. The lender isn’t required to file a 1099-C if it still wants to collect or to notify you if it has intended to stop trying to collect. The lender can continue trying to collect indefinitely. That’s good for you only in that the canceled debt doesn’t then become income you have to pay taxes on."

You can google some more info regarding this topic. Its so complicated. Courts are also having a hard time with 1099c's ins and outs after researching an answer for you.

Re: The Spector of 1099-C After Credit Rebuild?

LegalTender — Sat, 14 Dec 2019 18:54:43 GMT

Thanks FireMedic1.

Yeah, I'd been reading a bit about the 1099-C issue and never felt I had a comprehensive understanding.

Based on what you've referenced, it appears that the specter of a 1099-C being filed on a defaulted CC account only ends when the debtor dies.

What happens when a 1099-c is issued?

Anonymous — Fri, 29 Jan 2021 22:11:12 GMT

Good day community.

The 1099-c seemed to be straight forward on why they send them. What really happens to the debt when they send them out?

1. Does the collection account show up as paid?

2. Does the collection account show up as forgiven?

3. Does the collection account appear with a $0 balance?

4. Is the debt no longer collectable?

Once a person files the form as income with their tax returns is the debt considered paid? If this is the case who do you GW to have the debt removed from your credit report? Or can it be disputed and removed from your credit report at all?

Thanks for helping.

Re: What happens when a -c is issued?

RobertEG — Fri, 29 Jan 2021 22:08:00 GMT

This is a very controversial topic.

Many creditors take the position that IRS regs mandate sending of a form 1099c under certain circumstances where the creditor has not necessarily cancelled the entire debt, and thus that sending of a 1099c does not necessarily require update of the current balance to $0.

That argument, however, is not universally accepted, particularly once the consumer has paid income tax on the debt amount set forth in a 1099c.

A simply google on the term form 1099c and related terms, such as debt discharge or zero balance, will provide many articles discussing these contradictory positions....

Re: What happens when a -c is issued?

Anonymous — Fri, 29 Jan 2021 22:16:24 GMT

@RobertEG wrote:
This is a very controversial topic.
Many creditors take the position that IRS regs mandate sending of a form 1099c under certain circumstances where the creditor has not necessarily cancelled the entire debt, and thus that sending of a 1099c does not necessarily require update of the current balance to $0.

That argument, however, is not universally accepted, particularly once the consumer has paid income tax on the debt amount set forth in a 1099c.

A simply google on the term form 1099c and related terms, such as debt discharge or zero balance, will provide many articles discussing these contradictory positions....

That is absolutely horrible. They make you pay taxes on the income. They right off the debt and get a tax break. Then if you pay the debt (CO, or collection) they have double if not tripled dipped. There must be transperancy and better regulations of the matter. Many families and individuals are being hunted with this scenario.
I believe that once a 1099-c is issued that the account should be forgiven, deleted and or paid in full displayed on credit reports.
Thank you for sharing the info.

Re: What happens when a -c is issued?

Anonymous — Sat, 30 Jan 2021 00:23:00 GMT

@Anonymous wrote:
@RobertEG wrote:
This is a very controversial topic.
Many creditors take the position that IRS regs mandate sending of a form 1099c under certain circumstances where the creditor has not necessarily cancelled the entire debt, and thus that sending of a 1099c does not necessarily require update of the current balance to $0.

That argument, however, is not universally accepted, particularly once the consumer has paid income tax on the debt amount set forth in a 1099c.

A simply google on the term form 1099c and related terms, such as debt discharge or zero balance, will provide many articles discussing these contradictory positions....

That is absolutely horrible. They make you pay taxes on the income. They right off the debt and get a tax break. Then if you pay the debt (CO, or collection) they have double if not tripled dipped. There must be transperancy and better regulations of the matter. Many families and individuals are being hunted with this scenario.
I believe that once a 1099-c is issued that the account should be forgiven, deleted and or paid in full displayed on credit reports.
Thank you for sharing the info.

If you talk about what should happen, people should pay their debts before it becomes this issue.

Re: What happens when a -c is issued?

Anonymous — Sat, 30 Jan 2021 02:04:16 GMT

@Anonymouswrote: If you talk about what should happen, people should pay their debts before it becomes this issue.

I personally believe that this forum is here to help those that are trying to improve their lives and financial health. We know that we should pay our debts, but there is something call life that happens every now and again. So if everyone paid their debts and life did not happen, there would be no need for this forum.

At sometime in your life I think you might have had some issues and that is why you are a member of this forum. You did not just wake up and have an 800 credit score. You may have not every had credit problems, but you could have used this forum to grow more credit worthy by using community members help on topics that you needed help with.

Not everyone on here uses the community because they did not pay their debt!

Mod edited part of the post, if you disagree with something that's being said, please utilize three dots in the right upper hand corner, report inappropriate content.

Re: What happens when a -c is issued?

Anonymous — Sat, 30 Jan 2021 01:56:50 GMT

@Anonymous wrote:
@Anonymous wrote:
@RobertEG wrote:
This is a very controversial topic.
Many creditors take the position that IRS regs mandate sending of a form 1099c under certain circumstances where the creditor has not necessarily cancelled the entire debt, and thus that sending of a 1099c does not necessarily require update of the current balance to $0.

That argument, however, is not universally accepted, particularly once the consumer has paid income tax on the debt amount set forth in a 1099c.

A simply google on the term form 1099c and related terms, such as debt discharge or zero balance, will provide many articles discussing these contradictory positions....

That is absolutely horrible. They make you pay taxes on the income. They right off the debt and get a tax break. Then if you pay the debt (CO, or collection) they have double if not tripled dipped. There must be transperancy and better regulations of the matter. Many families and individuals are being hunted with this scenario.
I believe that once a 1099-c is issued that the account should be forgiven, deleted and or paid in full displayed on credit reports.
Thank you for sharing the info.

If you talk about what should happen, people should pay their debts before it becomes this issue.

This forum is to be supportive and nit judgemental. There are many questions regarding credit and debt that are discussed here - good and bad.

Some people have bad things happen to ruin their credit and some have to give up when times get tough. It is always most important to keep a roof over one's head and fed. Life is not always so easy or cut and dry for everyone. I have enev found how quickly it is to forget how rough the bad times were when things get better. Others have no idea what bad times are and are quite fortunate. It can happen to any class at any time.

Let's keep this conversation positive and avoid judgment.

Re: What happens when a -c is issued?

Remedios — Sat, 30 Jan 2021 02:09:37 GMT

This forum is supportive, but also offers an opportunity for wide variety of opinions, as long as they are done in respectful manner.

Instead of instructing each other on how to behave, please use report inappropriate content link, and someone will take a look.

Re: What happens when a -c is issued?

Anonymous — Sat, 30 Jan 2021 03:14:56 GMT

@Remedios wrote:
This forum is supportive, but also offers an opportunity for wide variety of opinions, as long as they are done in respectful manner.
Instead of instructing each other on how to behave, please use report inappropriate content link, and someone will take a look.

I guess it just does not seem to expand on the topic and is more of a statement than even an opinion.

Re: What happens when a -c is issued?

LegalTender — Sat, 30 Jan 2021 04:38:52 GMT

Can a debtor preemptively pay taxes on defaulted debt that's past the SOL and without having received a 1099-c from the creditor? If yes, what are the steps for doing so?

One scenario appears that could - hypothetically - benefit the debtor is: if the debtor has a sizable combined sum of untaxed default amounts which are past the SOL, and the debtor finds themself in a low annual tax bracket (or even zero tax bracket if their income qualifies) it could perhaps be beneficial to voluntarily(?) pay taxes on the debt in that year ... to lock in a lower tax rate on a portion of the remaining debt vs. an alternative worst case scenario wherein during a single tax year when the debtor has a higher income and in which one, or more, 1099-C form(s) are received ... representing a large sum, and wherein the debtor faces a considerably higher tax rate on the debt, due to being assessed at a higher income tax bracket.

Anyone knowlegable of the tax code, or have experience or info on the above scenario?

Form 1099-C(Cancellation of Debt)

joeyv1985 — Mon, 01 Feb 2021 21:45:34 GMT

All,

I received a 1099-C from Chase today. It was for a credit card that was closed by them years ago due to a charge off. I ran into some issues during the last recession and let the account go past due($3700). Since then I've bounced back and my scores are not only knocking on 800, but I was able to get a Chase Sapphire Preferred card from them. Albeit it was done through their re-con and they gave me the credit card with a $5K CL. A couple of questions:
Should I be concerned?

How does this affect my relationship with Chase, in particular my CSP CC?
Can I get a credit increase from them now that it's "officially" off their books?
Will a "baddy" reappear on my CR?

I've never dealt with this before, so the fear of the unknown is bugging me. Any input would help. Thanks.

Re: Form 1099-C(Cancellation of Debt)

Anonymous — Mon, 01 Feb 2021 22:12:50 GMT

They knew about your default with them when they gave you a new card. It won't change that. It also won't change any "caution" they still have in regard to extending additional credit. Your internal file is still alive and well with them.

The only thing this will effect is that you must now pay taxes on the debt they cancelled.

Re: Form 1099-C(Cancellation of Debt)

joeyv1985 — Mon, 01 Feb 2021 22:18:38 GMT

@Anonymous wrote:
They knew about your default with them when they gave you a new card. It won't change that. It also won't change any "caution" they still have in regard to extending additional credit. Your internal file is still alive and well with them.

The only thing this will effect is that you must now pay taxes on the debt they cancelled.

Gotcha. If I recall correctly, to get a credit limit increase with Chase, they'll have to do a Hard Pull. By chance do they give auto increases like Citi? It would be nice to get the CL on my CSP to $10K. That's all I would need. My Amex Plat is the most active of my credit/charge cards, with my CSP a distant 2nd. The other 3 CC's all have zero balances and I use them maybe once every 2 months for menial purchases like groceries or gas just so the banks don't close those cards or decrease their respective CL's.

Re: Form 1099-C(Cancellation of Debt)

FinStar — Mon, 01 Feb 2021 23:22:59 GMT

@joeyv1985 wrote:
@Anonymous wrote:
They knew about your default with them when they gave you a new card. It won't change that. It also won't change any "caution" they still have in regard to extending additional credit. Your internal file is still alive and well with them.

The only thing this will effect is that you must now pay taxes on the debt they cancelled.
Gotcha. If I recall correctly, to get a credit limit increase with Chase, they'll have to do a Hard Pull. By chance do they give auto increases like Citi? It would be nice to get the CL on my CSP to $10K. That's all I would need. My Amex Plat is the most active of my credit/charge cards, with my CSP a distant 2nd. The other 3 CC's all have zero balances and I use them maybe once every 2 months for menial purchases like groceries or gas just so the banks don't close those cards or decrease their respective CL's.

Yes, Chase CLI requests are HP (sometimes a double pull). Auto-CLIs are not as frequent (based on a variety of reported DPs), but they do happen.

Re: What happens when a -c is issued?

Credit4Growth — Tue, 02 Feb 2021 23:24:07 GMT

@WannaBcreditNerd wrote:
@RobertEG wrote:
This is a very controversial topic.
Many creditors take the position that IRS regs mandate sending of a form 1099c under certain circumstances where the creditor has not necessarily cancelled the entire debt, and thus that sending of a 1099c does not necessarily require update of the current balance to $0.

That argument, however, is not universally accepted, particularly once the consumer has paid income tax on the debt amount set forth in a 1099c.

A simply google on the term form 1099c and related terms, such as debt discharge or zero balance, will provide many articles discussing these contradictory positions....

That is absolutely horrible. They make you pay taxes on the income. They right off the debt and get a tax break. Then if you pay the debt (CO, or collection) they have double if not tripled dipped. There must be transperancy and better regulations of the matter. Many families and individuals are being hunted with this scenario.
I believe that once a 1099-c is issued that the account should be forgiven, deleted and or paid in full displayed on credit reports.
Thank you for sharing the info.

I side with you on this and at the same time I try to look at this from a GAAP perspective.

1099 C informational form filed with the individual's tax return (1040# what ever version you file) counts as income to the individual ...from the company writing off the debt or forgiving /cancelling the debt in such a way as I already stated. It is pictured as if they gave you the monies, ie. for a CC you made purchases using the cc but never paid the balance of the card off.

It seems to be a form of redress or grievance for them to receive fund as a tax credit and the individual borrower does not have to pay the balance off but of course the damage to a credit report ( a separate party/body not involved n the monetary transaction) shows a form of accounting for it, publicly.

This all sucks MOD CUT - LANGUAGE and I am dealing with this as well. My comprehension of the situation had keep me from moving on in a positive way by immediately settling or paying PIF the debt and allowing my score to heal/recover sooner than later

Then it hit me just about a month ago. Not to negative but to be correct and compliant with accounting procedures. Pay the CC delinquent amount (PIF) and if accepted by the company, also send a 1099 form to them as well (informational form by January 31, of the following year) if and only if it meets all of the IRS compliance guidelines and rules, ie. amounts over six hundred dollars. I believe this would have them as receiving the funds, updating the credit reports to a zero balance (in the individual's favor) and that company will have to pay taxes on the income.

I was poor at the french language so excuse me when I say this all may seem to be a part of a big MOD CUT - PROFANITIES ARENT ALLOWED, AND REPLACING ONE LETTER WITH A NUMBER DOESNT MAKE THEM ANY MORE ACCEPTABLE.

REMEDIOS

I have not actually done this as I would have just missed the dated deadline but that was my opinion.

Re: What happens when a -c is issued?

gdale6 — Tue, 02 Feb 2021 20:45:29 GMT

Not all 1099-C debt cancellation results in taxes due, if you are insolvent at the time the 1099-C is issued then there are no taxes due, there is a form to figure out if taxes are due or not.

Re: What happens when a -c is issued?

FinStar — Tue, 02 Feb 2021 23:28:06 GMT

The thread has been locked to new messages as the initial topic started >1 year ago and has run its course.