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How Common Is Getting An IRS 1099C?

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    How Common Is Getting An IRS 1099C?

    Another question on the forum prompted me to ask this:

    Anyone know how common/uncommon to have a CC debt canceled/determined to be non-collectible, and then the debtor receives an IRS 1099C?

    Would it typically be YEARS of non-payment that would trigger this or very large amounts? I just don't hear much about this particular situation. Thanks.

    #2
    Hi Ryan,

    I don't know how common or uncommon a 1099-C is, but I was curious about your second question regarding what might trigger receiving one. I'm not sure if I found anything you didn't already know, but here is an interesting link that might help:

    OK - from now on it's not a "Bankruptcy." It's a "Weight Loss Program." I'm in. Sign me up.

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      #3
      I received a 1099-C in 2010, just 3 months after one of my investment properties was foreclosed upon. I can't gauge whether my bankruptcy had anything to do with the swift issuance.
      Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
      Status: (Auto) Discharged and Closed! 5/10
      Visit My BKForum Blog: justbroke's Blog

      Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

      Comment


        #4
        There are certain triggering events. It depends, somewhat, on context; are we talking about mortgage debt or unsecured debt (e.g. credit cards)? If your curious, go to www.irs.gov and look for the instructions and publication that accompany form 1099-C.

        In the mortgage context, the 1099-C's come fairly quickly and are common. In the credit card context, it is very rare until a debt is actually settled. Reason being, the debt keeps getting sold around for "someone" to try to collect. However, one triggering event is that if a entity has not made any collection attempts in 36 months, then the entity is required to issue a 1099-C. But, so long as someone is trying to collect the debt, no 1099-C will issue.

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          #5
          Very interesting --- does it stand to reason that if you DID receive one the debt cannot be collected on again?

          Comment


            #6
            Originally posted by df04527 View Post
            Very interesting --- does it stand to reason that if you DID receive one the debt cannot be collected on again?
            Unfortunately, no. But again, it depends on circumstances.

            For example, the 36 month triggering event can occur, but the debt is still "technically" collectible. The entity is required to issue the 1099-C if it made no collection attempts within 36 months (the test period), but the debt, itself, is not extinguished because a 1099-C is issued.

            However, in most cases, once a 1099-C is issued, the debt is written off and extinguished, but there are loopholes.

            Comment


              #7
              Originally posted by HHM View Post
              ....In the mortgage context, the 1099-C's come fairly quickly and are common. In the credit card context, it is very rare until a debt is actually settled. Reason being, the debt keeps getting sold around for "someone" to try to collect. .....
              Thanks, thats interesting and makes me wonder how they likely treat a defaulted HELOC?...I have one with BofA, as is my 1st mortgage. Mortgage is in FC, but I have heard almost nothing from the BofA HELOC in almost a year?

              Comment


                #8
                Originally posted by HHM View Post
                There are certain triggering events. It depends, somewhat, on context; are we talking about mortgage debt or unsecured debt (e.g. credit cards)? If your curious, go to www.irs.gov and look for the instructions and publication that accompany form 1099-C.

                In the mortgage context, the 1099-C's come fairly quickly and are common. In the credit card context, it is very rare until a debt is actually settled. Reason being, the debt keeps getting sold around for "someone" to try to collect. However, one triggering event is that if a entity has not made any collection attempts in 36 months, then the entity is required to issue a 1099-C. But, so long as someone is trying to collect the debt, no 1099-C will issue.
                hhm.....would it not in the case of a foreclosure be considered Nonrecourse debt....if it was discharged or the property foreclosed and or surrendered and discharged at a bk....or through the process of discharge on an unsecured debt whether it be a charge card or something else of value?

                "CHARGED OFF (CANCELED) DEBTS AND THE IRS | 1099C
                If your debt has been written off by a creditor then you may receive a 1099-c form from the source. You must claims this amount as income on your taxes because you never paid it back- thus making it income. However if you "settle" this debt as "paid in full" with the creditor make sure you ask that they agree to the settled in full arrangement and not send the remainder as a loss to the IRS. If the creditor willingly accepts "less than" as "full payment" then make sure they agree not to report remainder. The creditor can refuse but usually does not. See exceptions below for more information on excluded debts.

                Generally, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income. You have no income from the canceled debt if it is intended as a gift to you. A debt includes any indebtedness for which you are liable or which attaches to property you hold. If the debt is a nonbusiness debt, report the canceled amount on line 21 of Form 1040. If it is a business debt, report the amount on Schedule C or Schedule C-EZ (Form 1040) (or on Schedule F, Profit or Loss From Farming (Form 1040), if you are a farmer).

                Form 1099-C. If a federal government agency, financial institution, or credit union cancels or forgives a debt you owe of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. The amount of the canceled debt is shown in box 2. "

                Interest included in canceled debt can also result in a 1099C??? correct???


                Nonrecourse debt
                If you are not personally liable for the debt (nonrecourse debt), different rules apply. You may have a gain or loss if a nonrecourse debt is canceled or forgiven in conjunction with the foreclosure or repossession of property to which the debt attaches. See Publication 544 for more information.


                If you are not personally liable for the debt (nonrecourse debt), different rules apply. You may have a gain or loss if a nonrecourse debt is canceled or forgiven in conjunction with the foreclosure or repossession of property to which the debt attaches. See Publication 544 for more information.
                8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

                Comment


                  #9
                  There is a Federal law allowing a tax exemption for mortgage debt forgiveness running till at least 2012 I believe.
                  filed chapter 13..confirmed...converted to chapter 7...DISCHARGED!

                  Comment


                    #10
                    Originally posted by catleg View Post
                    There is a Federal law allowing a tax exemption for mortgage debt forgiveness running till at least 2012 I believe.
                    tom that's interestng about the 2012 date... i wonder why that date??

                    i would still think...and someone needs to correct me if i'm wrong, but the nonrecourse debt would apply to anything discharged or foreclosed on.

                    really, think about it, what someone can't pay their creditors or their mortgage but it is excepted after a discharge to pay the irs??

                    also, i do believe IF the amount of the 1099c is for the difference in a house which was in theforeclosure process AT the time of the bk filing and the docket was listed, but the house was included with the auto stay.... and, the amount was listed on the petition to the mortgage holder was listed as "unknown" (since no number at that time was available) ....that unknown factored amount would be in effect for longer than 2012...or any date for that matter.


                    shoot...many of these banks are holding properties forever and a day, or buying them back and holding them, hoping for values to increase...that could be for years down the road.
                    8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

                    Comment


                      #11
                      Originally posted by ryan View Post
                      Another question on the forum prompted me to ask this:

                      Anyone know how common/uncommon to have a CC debt canceled/determined to be non-collectible, and then the debtor receives an IRS 1099C?

                      Would it typically be YEARS of non-payment that would trigger this or very large amounts? I just don't hear much about this particular situation. Thanks.
                      Out of my many, many charged off debts, only one ever issued a 1099-C to me. It was from one of my few remaining original creditors. It was a credit card company and for some reason, they never sold the debt to a junk debt buyer. They tried 4 different collection agencies and each one received a C & D letter from me with a paragraph at the end explaining my lack of assets and wages to garnish, etc. Eventually, they gave up on me and stopped sending the account out to collection agencies, stopped sending me letters about the debt and stopped attempting to call me. After 3 years of doing this, they had to send me a 1099-C. They really had no choice in the matter.

                      I am not sure whether the debt is now extinguished or not. I would not be surprised if they still came after me for it someday in the future, but at this point, it is already beyond the statute of limitations for filing a lawsuit against me.

                      I sent in the form to the IRS to exclude that amount of canceled debt from my income based on insolvency. I haven't heard back from them on it yet.

                      The junk debt buyers who bought up my debt have also fallen silent. I have not yet received any 1099-C forms from them. I think it mainly happens with original creditors, not junk debt buyers. If anyone out there has experienced a junk debt buyer sending them a 1099-C form, I would like to hear about it.

                      The trigger for creditors seems to be 36 months of no collection activity, or when they settle an account for less than what is owed on it.
                      The world's simplest C & D Letter:
                      "I demand that you cease and desist from any communication with me."
                      Notice that I never actually mention or acknowledge the debt in my letter.

                      Comment

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