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  1. #1
    jh180205 is offline Junior Member
    Join Date
    Jul 2008

    1099-C Cancelation of debt and still being sued?

    What is the name of your state (only U.S. law)? Ohio

    I received a 1099-C form this year for a delinquent debt that stated the debt was canceled as of 7-22-2004. The form was for the 2007 tax year. I filed the appropriate forms with the IRS and paid my taxes on this "income" and assumed the issue was closed.

    Five days ago, I received a letter from an attorney's office stating that a "lawsuit is being filed" against me regarding this debt. Can the creditor still collect this money considering that (at least as far as the IRS is concerned) the debt has been "canceled"? What are my options and how do I avoid having my personal property seized if I cannot pay the amount? (Oh and to make matters more complicated, I'm only working on an as-needed basis and getting ready to take maternity leave which leaves nothing to garnish)

  2. #2
    justalayman is offline Senior Member
    Join Date
    Nov 2005
    in the ether
    =jh180205;1982006]Can the creditor still collect this money considering that (at least as far as the IRS is concerned) the debt has been "canceled"?
    yes, they can

  3. #3
    TigerD is offline Senior Member
    Join Date
    Jul 2005
    Quote Originally Posted by justalayman View Post
    yes, they can
    Really? I may be mistaken, and correct me if I am, but I thought that the purpose of a 1099 was forgiveness of the debt, which causes the debtor to have to pay taxes on the income derived by the debt.

    I have never pursued a debt after a 1099 was issued. The debt was simply gone.


  4. #4
    longsally111 is offline Member
    Join Date
    Jan 2005
    DC is correct on that one. I had the same thing happen to me with a car loan. First, the sol had already tolled. It is 3 years in sc and they started collections about 5 1/2 years later. I wrote them a letter RRR telling them that they were stupid enough to buy a loan that had the 1099c done and that it would be my defense on a lawsuit along with the sol passing. They did not bother me again and noone else does about that loan either,

  5. #5
    justalayman is offline Senior Member
    Join Date
    Nov 2005
    in the ether
    SOL presents a totally different situation and is not relevent to the situation at hand, at least without other information not given. The lack of collections does not mean it is not actionable but merely nobody wants to take action. As we all know, the SOL defense is an affirmative defense and must be presented as a defense. It does not prevent an legal action from being initiated in itself.

    This has been discussed and has been litigated, to a point and while most are of the opinion that a debt that is included in a 1099C is uncollectable, there is apparently some disagreement as to the situation.

    On this board even, this was discussed and debt guy laid out a lot of info.


    an excerpt from that thread:

    Can an attempt ever be made to collect the debt again once you've received a 1099-c and paid taxes on it?

    I am told by an Enrolled Agent the answer is "Yes" and he refers me to a Tax Court ruling "Debt Buyers Association v. U.S. Treasury #06-101 Jan 30, 2006" -- but I have not personally tried to research that reference.
    Here is a link to, I believe, is the case noted.


    I believe that debt guys argument, at one point or another was, the 1099c is mandated to be issued at some point regardless of the creditors intent. The case above uses that argument as well and that the issuance was a matter required by law but did not reflect the intentions of the creditor. That way, a creditor can reserve the option of collecting the debt if the issuance was due to statutory mandates and not the actual cancellation of the debt.

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