Capital One Settlement

[huntsmama]

Hi everyone, this is my first post but I've been reading all of yours for about a year! Thanks for all the helpful info!

Here's my situation:

5 years ago, I lost my job, a week later I found out I was pregnant. When all was said and done I had 3 credit cards charged off and a repossession! It took a lot of work but I've rebuilt my score to a 668 (experian as of today) from a low of 490 about 2.5 years ago. Everything from way back when has been paid except this capital one account. 

Original balance: $2,495

Current balance: $5,627

Charge off: 6/2008

Never sent to a collection agency.

Last year, I made a valiant effort to settle the debt for $2,400. They wanted $4,400.

Here's where it gets REALLY tricky. As far as they know, I live in VA, SOL is up and they actually sent me a 1099-C for the $2,495 as of 12/31/2012. I actually live in NY, so I'd really like to get this settled ASAP because then I will have it fall off this summer. I'd like to buy a house and this is the only thing holding me back.

I'd still like to settle for about $2,400-$2,500, I think it's fair and I know I owe that from when I incurred the actual charges.

I'm hoping you guys can give me some advice as to how to approach and negotiate this one. I know I should do all through mail but I don't want to open the can of worms that is my new address. They can send things to my old address, which they have, as I have family who lives there and is aware of the situation, but I don't want to risk them catching anything on my outgoing mail.

Any help is so very much appreciated!!!

[Shogun]

If a 1099C was issued, then there shouldn't be a debt.

[Anonymous]

+1

Once a 1099-C is issued you have to include that has income for the year you received it.  It is illegal of them to issue a 1099-C and attempt further collection activity.

[huntsmama]

They're still reporting the full balance. They aren't trying to collect and I did claim it on my taxes. I'd really like to get it taken care of so I can get it off...if it's best to just give it a couple more months and see if they adjust the balance then, I can do that, I'd just like to get it taken care of so I can get it taken off this summer.

[Shogun]

Send them a direct dispute and notify them that you have paid the taxes on this debt.  They can't claim a loss and collect too, that's double dipping.

[Anonymous]

You reporting it as income is settling, in a sense.  They got a tax cut and you paid for it by including it as income.

[huntsmama]

Works for me! That turned out to be EASY!

Thanks guys!

[huntsmama]

One more thing. They cancelled the debt for ONLY the principle, not the full amount including interest and fees. This can't come back to bite me in the behind by them demanding I pay the interest and fees, can it?

[huntsmama]

Can anyone tell me if they can still collect for the fees/interest if the yonly cancelled the principle?

[Anonymous]

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@huntsmama wrote:

Can anyone tell me if they can still collect for the fees/interest if the yonly cancelled the principle?

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I am going to go out on a limb and say they cannot.  When they issued the 1099-C it has a place for interest and fees.  They don't have to include those but can.  In my opinion, if they forgave the principal, how can they attempt to collect fees and interest on a non-existent debt.

I have done tons of research, read the IRS literature and can't find a definitive answer.

You could always contact a tax attorney and ask them.