If a creditor sends you a 1099-C is the debt 'forgiven' and how will it appear on your credit report?

Answer

The debt is forgiven and sooner or later a notice will appear on the CR. This is not a plus for you rating though. Then there is the IRS involvement gains, losses, blah, blah, blah. Just the thught gives me a headache!

Answer

it may not be good for your credit report but it is much better than the overdue debt that you had.

THE 1099-C IS ANOTHER WAY THE CREDITOR YOU OWE, IS GOING AFTER YOU. YOU ARE REQUIRED TO REPORT THIS UNPAID DEBT AS INCOME ON YOUR FEDERAL TAXES.

Better Answer

The IRS form 1099 is used by various entities to report income that they have perceived you have earned. Example: Blah Bank issues you a credit card. You run up $2,000 and never pay. After some time Blah Bank will issue a 1099 to you. They are also reporting the $2000 as income you have earned, to the IRS. A 1099 can be a blessing because no one elsae can come after you for the $2,000, the bad side is that now you may have to pay income tax on the $2000.

The IRS requires financial institutions to report to them the amount of principal they charge-off for individual borrowers. It is only to be filed after you have stopped collection activity and there has been no payment activity on the account for three years. This is not a way for finanical institutions to try and collect further. It is an added burden on them to track these conditions and find the records when they meet the critieria for filling. The financial insitution had written the debt off years earlier.

The state law effect of a form 1099-C varies. Connecticut views it as a signed writing that releases the claim, California does not. Kansas views it as having discharged the claim, but the reasoning of the judge in that case was flawed. In any case where a debtor has defenses to assert against a creditor's claim, SOL should be the last one used because its successful use triggers the requirement for the creditor to issue a form 1099-C. If a defense such as lack of documentation is successful, the 1099-C issue is never reached.

First answer by Nikki. Last edit by Flacorps. Contributor trust: 9 [recommend contributor]. Question popularity: 158 [recommend question]