I9 Credit rating

[BigJohn]

Got a letter, by UPS, from a creditor saying they are going to be charging off our account later this month, and if they do, they are going to report to the credit bureau our rating as I9.

From what I understand, I9 means uncollectable. Is that correct? We stopped paying in March.

[Flamingo]

I9 (or R9 on some reports) means you officially have bad debt which is usually uncollectible.

[justplaintired]

I don't understand does that mean they give up on this debt? They won't try collecting anymore?

[Flamingo]

This will help explain...(hopefully it comes out OK but I9 is the worst debt rating):

Rating Description
R0 or I0 You are new to the credit world, and you have an insufficient credit history for making an accurate judgment of your future risk.
R1 or I1 You pay your credit back in 1 month.
R2 or I2 You pay your credit back in 2 months.
R3 or I3 You pay your credit back in 3 months.
R4 or I4 You pay your credit back in 4 months.
R5 or I5 You have not repaid in four months, but you are not a "9" yet.
R7 or I7 Your debt payments are made under consolidation.
R8 or I8 Debt was cleared by selling the item (repossession).
R9 or I9 You officially have bad debt (default), which usually means it is uncollectible.

[Frogge]

so does this mean they won't pursue further action?

[justplaintired]

Well depends, an I9 means its a bad debt they usually will place a notation on the account like; skip, refused to pay, charge off.

Under federal law CC's are required to charge off a debt after 180 days of not being able to collect on it. Now what they decide to do with it after it is charged off can be a whole other thread. But in general let me give some ideas.

If they were to send you a 1099-C for the amount (and usually they inflate the amount so they can take a larger tax write off) If you get a 1099-C you do not owe them any longer. You may have a tax problem though. Problem with this is then they sell the debt (illegal if they took the tax deduction, you can't do both or you can only 1099-C for the difference of what is owed and written off vs. what the debt was sold for). But then we get into can the party who bought the debt that had a 1099-C already and they paid pennies on the dollar for it attempt to collect the full amount. The is a fundamental problem with JDB and when debt gets sold over and over.

OK, now they can keep the debt in house and still try to collect it, they can sue you, hire a collection agency, sell it to someone else all the same things they do. So the fact it was marked I9 or R9 is not relative to anything but impacting your credit in a negative way.

Thanks for the explanation. We haven't had anything like that yet. But I wanted to understand just in case. Thanks again!

[treehugger1]

If you receive a 1099-C, it is my understanding that whatever the 1099-C amount listed is "income" to you, so you might owe taxes on the forgiven amount. Since this is now income to you via a debt forgiveness, then the debt is "forgiven" and you could owe taxes on it. Since all parties have made use or been responsible for the taxes issue, the portion forgiven cannot be collected upon. Here is what one might do:

Suppose you are sued for a debt that was forgiven in full and you have a 1099-C to prove the debt was forgiven, listed as income to you, and charged-off the creditor's books. Take your 1099-C with you to the courthouse, and watch the JDB squirm.

Its one thing to charge-off an acount. It is an entirely different scenario if you receive a 1099-C. This is taxable income to you.

If you receive a 1099-C and a collection attempt on the same debt, I would seek a knowledgeable CPA for advise. The creditors cannot have their cake and eat it too.

A charge-off is a mid-level accounting move required by federal law. A 1099-C is a notice of debt forgiveness which implies taxable income to you, and an acknowledgement that the debt has been "satisfied." I don't know the particluars but this is my take.

Just my humble opinion.