I am confused about Charge Off

[Red1Blue]

The more I am reading, I am really confused about Charge off and 1099-C. By the time account goes into charge off they are going to charge fines and huge interest charges to inflate the debt. Now if we make a settlement and pay less than the total amount they give a 1099-C. What happens if we dont settle and let the debt sit the way it is and let it fall off the credit report after 7 years. In that case do we still have to worry about 1099-C? I am more like it sit there instead of begging creditors to settle and go through all the 9 years. Once the SOL is done it really does not matter. Worst case some one might sue if it is still before SOL. Once the SOL is passed they can not collect any way. What are the consequences of letting the charge off debt sit on the credit report instead of settling ? 

[FireMedic1]

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@Red1Blue wrote:

The more I am reading, I am really confused about Charge off and 1099-C. By the time account goes into charge off they are going to charge fines (fines?) and huge interest charges to inflate the debt. Now if we make a settlement and pay less than the total amount they give a 1099-C. What happens if we dont settle and let the debt sit the way it is and let it fall off the credit report after 7 years. In that case do we still have to worry about 1099-C? I am more like it sit there instead of begging creditors to settle and go through all the 9 years. (9yrs?) Once the SOL is done it really does not matter. Worst case some one might sue if it is still before SOL. Once the SOL is passed they can not collect any way. <Depends in what state you live in. What are the consequences of letting the charge off debt sit on the credit report instead of settling ? 

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Once charged off thats it. Balance stays the same. They basically write off the debt for internal records. The charge off is considered a maxed out card and it hurts. And it keeps updating each month. Come to a settlement and be done with it. Whats the DoFD. We've been thru this before in another thread if I remeber correctly.

[silver_idle]

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@Red1Blue wrote:

The more I am reading, I am really confused about Charge off and 1099-C. By the time account goes into charge off they are going to charge fines and huge interest charges to inflate the debt. Now if we make a settlement and pay less than the total amount they give a 1099-C. What happens if we dont settle and let the debt sit the way it is and let it fall off the credit report after 7 years. In that case do we still have to worry about 1099-C? I am more like it sit there instead of begging creditors to settle and go through all the 9 years. Once the SOL is done it really does not matter. Worst case some one might sue if it is still before SOL. Once the SOL is passed they can not collect any way. What are the consequences of letting the charge off debt sit on the credit report instead of settling ? 

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It was discussed multiple thread (more recently https://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/1099-C-Form-But-Still-on-Credit-Report/m-p/5...) but to keep it short, they could cancel the debt out completely and issue a 1099-C to you. If you settle and the remaining balance is more than $600 then they would issue a 1099-C. It becomes a gray area honestly because its unsure if there is a deadline they would have to issue a 1099-C (eg before the SOL of that state, before it falls off the credit report, etc) so in theory they could issue you a 1099-C 10 years from today if it goes uncollected. Honestly, instead of waiting it out or waiting for them to sue and get a judgement against you, its best to work it out with them and knock it out so it would stop updating and you can move on rebuilding your credit. Letting it sit will just hurt your scores and make it harder to obtain credit.

Also, keep in mind, even if the SOL expires, it doesnt cancels the debt, its just that they cannot sue you for it. If they do, it could get dismissed, but however making an agreement to pay it does reset the SOL for that debt.

[FireMedic1]

@Red1BlueYou have to check on your states SOL. There was a poster in PA this week. The creditors can still sue after the SOL runs out and get a judgement. Its a state by state issue. Read up on your states SOL and the laws where you live. The one that doesnt and cant change is the DoFD and credit reporting. 7 yrs. Poof. Done.

@silver_idleI was speaking to concorduser about this situation before in another thread they had. Not someone elses thread. Each case is different depending on location.