The Spector of 1099-C After Credit Rebuild?

LegalTender · ‎12-13-2019

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).

FireMedic1 · ‎12-13-2019

@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.

LegalTender · ‎12-14-2019

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.

Anonymous · ‎01-29-2021

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.

RobertEG · ‎01-29-2021

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....

Anonymous · ‎01-29-2021

@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.

Anonymous · ‎01-29-2021

@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.

Anonymous · ‎01-29-2021

@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.

Anonymous · ‎01-29-2021

@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.

Remedios · ‎01-29-2021

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.