[acebo]

For a debt shy of $20K around default, what are the best settlement rates you've seen? Obviously 50 cents on the dollar is easily obtainable. I'm wondering about 5-10-15 cents on the dollar. I'm in court now on notice of appeal for sewer service, IF i get a decent judge my case should be dismissed with the sloppy paperwork from CA. I do realize that the CA will come after me again.

What do I ask for other than no 1099-c or bad credit reporting.

Many TIA.

[Enigma]

You will receive a 1099-C whether you like it or not. It is now mandated by the IRC.

How old is the debt?

[acebo]

2-years old, well within the SOL. I'll have to hold off settling, because I don't have enough to pay taxes on top of what little I have saved up.

But can't they "waive" some of the $39 late fees, $39 over the limit fees, the 30% interest, etc? Or does that all go under the 1099-C?

[Enigma]

Only the principal amount is included in the 1099. No fees or interest.

[ilovemydogs]

Originally Posted by Enigma

You will receive a 1099-C whether you like it or not. It is now mandated by the IRC.

How old is the debt?

When did this become mandated? I settled in 2007 no 1099-C yet...
ILMD

[acebo]

Thank you, Enigma.

Can anyone help me with the best rates of discount that they have heard of with OCs???

[Enigma]

Originally Posted by ilovemydogs

When did this become mandated? I settled in 2007 no 1099-C yet...
ILMD

Tax year 2007.

[Enigma]

Originally Posted by acebo

Thank you, Enigma.

Can anyone help me with the best rates of discount that they have heard of with OCs???

Don't look at what others have achieved, do your own math.

You know how much money you have. Start from standpoint of all monies going to the settlement vs. some money followed by payments.

Now, lets say you settle for $10,000, but that leaves $10,000 that is going to a 1099-C. $10,000 x Tax Bracket% = total cost of settlement.

[rubyruby27]

I thought I read somewhere, don't remember where that in order for them to do a 1099 they must have documentation the debt is yours and the amount is correct. Its an IRS violation of some sort.

I don't remeber where I read it but it was recent.

[Enigma]

Originally Posted by rubyruby27

I thought I read somewhere, don't remember where that in order for them to do a 1099 they must have documentation the debt is yours and the amount is correct. Its an IRS violation of some sort.

I don't remeber where I read it but it was recent.

Questions and Answers on Home Foreclosure and Debt Cancellation

www.lsnv.org/Debt_Cancellation_Vignette.doc

The author has included a worksheet.

IRS Form 1099-C: Cancellation of Debt

Overview
This brochure is designed to provide information and instruction for individuals who have received a Cancellation of Debt IRS 1099-C.

If you have reached a compromise or settlement with a creditor agreeing to release you from any further obligations regarding the repayment of a debt, a credit card debt for example, your responsibilities may not end at this point. Your creditor may “write off” all or part of the debt it claims that you owe, and report it as a tax loss to the IRS using a 1099-C.

Because you never paid the debt-claim in full, the IRS can treat a cancellation of a debt-claim as income you have received. For example, $4,500 credit card bill in which a compromise has been reached to settle the debt for $2,500 is in theory a $2,000 personal net gain. The IRS may require you to report this as income you have received for the tax year even though you have not actually received the money.

Why did I receive a 1099-C: Cancellation of Debt form?
If you have defaulted (failed to make payments as agreed) on a debt in the past and you have either reached a compromise with a creditor to settle your debt, or the creditor has deemed the debt to be non-collectable and has stopped attempts to recover, you may receive a 1099-C form. The IRS definition of a compromise in a collection case is the discharge of indebtedness under an agreement between the creditor and the debtor to cancel the debt at less than full consideration.

What is a 1099-C: Cancellation of Debt form?
A 1099-C form lets you know that a creditor is going to “write off” the remaining unpaid portion of your debt. An IRS 1099-C: Cancellation of Debt form is filed by a creditor to the IRS when a settlement agreement between a debtor and a creditor has been reached or when a creditor has determined that a debt will never be paid. If the debt is for $600 or more the creditor must send you, the debtor, a 1099-C in the mail by January 31st and to the IRS by February 28th of the tax year in which the debt was discharged.

What should I do after I receive a 1099-C: Cancellation of Debt form?
If you receive a 1099-C form from a creditor, you must report the amount of the canceled debt as income to the IRS even though you have not actually received the money. (The amount shown in Box 2 of the 1099-C form is the amount that must be reported as income.)


What debts are forgiven under a 1099-C: Cancellation of Debt form?
The IRS recognizes five situations where a cancelled debt does not have to be reported as income.
1. Bankruptcy – the debt was already discharged through a bankruptcy proceeding.
2. Insolvency – your total debts exceed your total assets at the time your debt was settled or deemed non-collectable.
3. Indebtedness is due to a qualified farm expense.
4. Indebtedness is due to certain real property business losses.
5. Discharge of your debt was treated as a gift. (Extremely rare)

If you are insolvent you need to explain this to the IRS in one of two ways. 1) By filling out IRS Form 982: Reduction of Tax Attributes Due to Discharge of Indebtedness or 2) Attaching a detailed letter to your tax return explaining the calculation of your total debts and assets.

How do I know if I am insolvent?
You are deemed to be insolvent if your total liabilities (debts) are greater than your total assets. Completing the insolvency worksheet at the bottom of this document will help you determine if you were insolvent at the time your debt was discharged. For example, if your total liabilities are $8,000 and your total assets at the time are $6,000 you are insolvent in the amount of $2,000. To determine the value of your assets use the fair market value rather than what you paid for them or what you think they are worth.

If you are insolvent you need to explain this to the IRS in one of two ways. 1) By filling out IRS Form 982: Reduction of Tax Attributes Due to Discharge of Indebtedness or 2) Attaching a detailed letter to your tax return explaining the calculation of your total debts and assets.

Helpful tips to avoid problems if you have received a 1099-C.
• If you settle your debt for less than full consideration (paid in full) be sure to ask the creditor if they intend to submit a 1099-C form to the IRS.
• Consider, if a debt compromise is in your best interest, or is it a smarter decision to pay the debt in full? Failure to report added income could end up costing you in the end.
• The name of the creditor may not be readily recognizable on the 1099-C form. The creditor may have sold the debt to a third party collection agency or the name of the parent company could be listed as the creditor.
• Look to see if the added income received from a debt cancellation will move you into a higher tax bracket. For a taxpayer in the 35% tax bracket in 2005, a $5,000 canceled debt could cost up to $1,750 in additional income taxes.
• You can not claim that you never received a 1099-C form in the mail. Even if you do not receive a 1099-C form you are expected to recognize a capital gain.
• IMPORTANT: For individuals receiving public benefits and public housing. Be sure to check if your updated income will exclude you from the benefits you are receiving.

The author, Ian Agster, is law student and summer inter at Legal Services of Northern Virginia.

[rubyruby27]

Thanks for the post, I am almost sure it was an article that I read. I don't think I kept it as my only debt over 600 is the cap one for 800+. that is all interest, late fees, over limit fee's on a 75.00 billing error.

Should I find it again I will post it.

[Enigma]

Originally Posted by rubyruby27

Thanks for the post, I am almost sure it was an article that I read. I don't think I kept it as my only debt over 600 is the cap one for 800+. that is all interest, late fees, over limit fee's on a 75.00 billing error.

Should I find it again I will post it.

The 1099 can only include the principal, no late fees, interest, etc.

[rubyruby27]

Maybe that's what I read, I really don't remember. I only remember the article said something to the effect they must own the debt and have proof to do a 1099. Thats what I found interesting in the article.

It might have been an aol article on the finance page.

[Enigma]

Originally Posted by rubyruby27

Maybe that's what I read, I really don't remember. I only remember the article said something to the effect they must own the debt and have proof to do a 1099. Thats what I found interesting in the article.

It might have been an aol article on the finance page.

If I send you a letter saying you own me $1000 and we settle for $300, leaving $700. I am required to send the IRS a notice.

Why do I need proof that you owed me the $1000 when you agreed to settle?

[rubyruby27]

I don't know, I read the article and thought it was interesting, yet it really didn't apply to me, so I don't remember everything it said.

It had to do with what the IRS required for them to give a 1099. I just remember that it said proof of the debt and the amount is one of them

Many people pay debts they don't owe for fear of what may happen to them esp the elderly. I don't know, I understand what you saying if you agree to pay then it must be yours but we know that isn't always true.

Lots of unscruplous people go after anyone with a similiar name and the elderly can be easily tricked into paying a debt that isn't thiers.

Hopefully, I can find it again so I can post it. I doubt I will as I was reading the daily finance blogs or articles.

[rubyruby27]

Perhaps I was thinking when I read this it would be impossible for a JDB or CA to do a 1099, since they would have to have the entire billing history in order to know what you owed on the prinicipal. They may buy the paper for the prinicipal owed but they have no proof this is the actual amount owed.

I know that Cavarly only had the last 2yrs the account was closed and it was just computer print out of the statements that said I owed a certain amount. Wouldn't the JDB have to have all business records from inception to prove the amount of the settlement they are reporting didn't include late payments, interest, overlimit payments. Perhaps thats what I was thinking when I read this article.

[trst]

I remember Butch had something on this. It was something to do with the wording of the settlement agreement and not admitting the debt. I'm going to have to think hard and try to remember exactly what he said...pregnancy and old age are hindering my memory.

[ilovemydogs]

Originally Posted by Enigma

The 1099 can only include the principal, no late fees, interest, etc.

Let's say the OC CO was 10K. Plaintiff (JDB) sent it off to NAF with an amount of 14K owed NAF awarded plaintiff 25K. So I settle for 10K which was the original amount charged off. Can JDB now send me a 1099 for 15K when he never paid anywhere near the amount, nor has gotten the award confirmed?
Thanks

[ilovemydogs]

Originally Posted by Enigma

Tax year 2007.

Shouldn't I have received it by now??