1099-C received after ch 7

Anonymous · ‎02-10-2012

Good morning again!

My ch 7 discharged in December of 2010, and I had included my 1st and 2nd mortgages. A month later I received a bill from Solace Financial LLC, who said they had bought my second mortgage from GMAC. I called immediately to explain that that account had been included in a bankruptcy a month earlier, and I gave them my bk information. They said not to worry about it, that it would be corrected and I forgot about it.

Now, a year later, I have received a 1099-C (Cancellation of debt) form from Solace which, by law, has to be filed with my income taxes. The form stated the date of debt cancellation as June of 2011 (7 months after my discharge) and is for an amount $8000 more than the amount I went bankrupt on w/GMAC (they included interest).

When I called Solace, the agent told me not to worry about it because they weren't coming after me for the money. He told me to file it with my taxes with a note saying that it shouldn't be included as income becuae it was part of a bankruptcy (!!!) Now, I realize that, even if this information were correct and it was from the actual creditor, that I wouldn't owe taxes on it, but I would also have to file an additional form, which is a PITA.

I tried to explain this to him and told him I wanted them to fix it so I could file my taxes properly. He said he would have the accounting department fix it and send me a letter saying that they had (after much hemming and hawing). He was reluctant to give me his name, and he accidentally slipped by telling me that Solace had "picked up this bankruptcy account". I know that they were aware of the circumstances and were just hoping I wouldn't know any better and just pay them. Now they're trying to write off the loss with the 1099.

I still haven't received anything from them, and can't file my taxes (getting a refund), so I called the IRS. They told me the company should send me a VOIDED 1099-C, and if they don't, and I still file my taxes, the IRS will send me a letter at the end of the year letting me know that I didn't delare income and charging me back taxes, interest and penalties. I asked her what to do if I can't get them to send it, and all she could say was, "you have to get it".

Has anyone had a similar problem? If so, how did you handle it? Would this be a situation that I could sue for violating a bankruptcy law? I do have proof of them trying to collect the debt at least once, and now they are messing with my income taxes. Every day I can't file is one more day without my tax refund. Also, I('m worried that this could end up on my CR as an additional negative item (charge off).

This has already taken up so much of my time and energy...advice anyone? Thank you so much.

Aly

Anonymous · ‎02-10-2012

Hi Redzer,

My first thoughts on this are that you need to work through your attorney. (Argh! )

I think it is pretty common for attorneys to stop returning calls after a BK discharge - but that doesn't make it right.

We did have to ask our attorney a question post BK discharge, and he did answer it. He basically told us the proper info to include in a letter we drafted, to have him copied on the letter and to note that on the bottom of the letter (i.e. "CC: our attorneys name") and then offered to step in if the properly worded letter didn't work. The letter did work, and that was the end of it

If (s)he's not returning your calls, I would hop on over to the office and (in person) make an appointment to see him/her.

Hiring a new attorney is another option, but doesn't seem practical to me.

jumpinjax · ‎02-16-2012

@Anonymous wrote:
Good morning again!

My ch 7 discharged in December of 2010, and I had included my 1st and 2nd mortgages. A month later I received a bill from Solace Financial LLC, who said they had bought my second mortgage from GMAC. I called immediately to explain that that account had been included in a bankruptcy a month earlier, and I gave them my bk information. They said not to worry about it, that it would be corrected and I forgot about it.

Now, a year later, I have received a 1099-C (Cancellation of debt) form from Solace which, by law, has to be filed with my income taxes. The form stated the date of debt cancellation as June of 2011 (7 months after my discharge) and is for an amount $8000 more than the amount I went bankrupt on w/GMAC (they included interest).

When I called Solace, the agent told me not to worry about it because they weren't coming after me for the money. He told me to file it with my taxes with a note saying that it shouldn't be included as income becuae it was part of a bankruptcy (!!!) Now, I realize that, even if this information were correct and it was from the actual creditor, that I wouldn't owe taxes on it, but I would also have to file an additional form, which is a PITA.

I tried to explain this to him and told him I wanted them to fix it so I could file my taxes properly. He said he would have the accounting department fix it and send me a letter saying that they had (after much hemming and hawing). He was reluctant to give me his name, and he accidentally slipped by telling me that Solace had "picked up this bankruptcy account". I know that they were aware of the circumstances and were just hoping I wouldn't know any better and just pay them. Now they're trying to write off the loss with the 1099.

I still haven't received anything from them, and can't file my taxes (getting a refund), so I called the IRS. They told me the company should send me a VOIDED 1099-C, and if they don't, and I still file my taxes, the IRS will send me a letter at the end of the year letting me know that I didn't delare income and charging me back taxes, interest and penalties. I asked her what to do if I can't get them to send it, and all she could say was, "you have to get it".

Has anyone had a similar problem? If so, how did you handle it? Would this be a situation that I could sue for violating a bankruptcy law? I do have proof of them trying to collect the debt at least once, and now they are messing with my income taxes. Every day I can't file is one more day without my tax refund. Also, I('m worried that this could end up on my CR as an additional negative item (charge off).

This has already taken up so much of my time and energy...advice anyone? Thank you so much.

Aly

Aly, this is a common occurence with creditors. They can and will file a 1099-c after bk. Even though the IRS rep told you to get a voided 1099-c, it is best to file a form 982 in your 1040, and mark title 11, bankruptcy discharge with the total amount. This is the saner and easiest way. Also, the reported 1099-c is excluded from your gross income once this form is filed. And be careful not to duplicate the amount elsewhere on your return.. Good luck!