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1099 Threat

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dkcolo

Guest
I am being pursued by a creditor to a former business upon which I personally signed on the business loan after which the business went bankrupt. The creditor is now pursueing me for full payment. The amount is so large that bankruptcy may be the only option, however the creditor has threatened to file a 1099 form which indicate that the amount that I file bankruptcy on would be counted as income upon which I would have to pay tax. Is there anyone who can comment on whether this, in fact, is the case.

kkbro, Colorado
 


bigun

Senior Member
Technically, the term is a 1099C.
Your creditor is trying to bluff you into not filing. A bankruptcy filing and discharge means the debt is wiped out and the money borrowed is not considered income. Also, there is another way that the issuance of a 1099C is meaningless whether you file bk or not. If you can prove insolvency on the date the 1099C is issued there will be no tax due.
 
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dkcolo

Guest
Negotiating

Thanks for your response, I have been finding it difficult to get clarification on this point.
To continue on the same matter, I have offered on two occassions to try and reach a negotiated settlement (through the debtor's collection agency), albeit at an amount that is only a fraction of the total debt. My last offer was a cash settlement amounting to only 10% but thought it was better than them getting nothing. They indicated they would not consider the offer unless I submitted to them all of my financial records for the last 3 years (tax statements, listing of assets, employment records, etc). I was advised not to reveal all of this information as it might be used against me in a law suit. Therefore we unfortunately seem to be at a stalemate which, again, seems that only a bankruptcy filling would resolve especially before the law changes making it even more difficult. Is this a reasonable request?
 

bigun

Senior Member
Someone gave you good advice about not revealing any information about your finances. My suggestion at this point is to retain legal council. Let them advise you about any possible bk filing. I would make no further settlement offers. Prehaps I would let a lawyer make one final offer but, I believe you are wise to keep the change in the bk law in the back of your mind. Good luck to you!
 

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