[DebtProblem]

2 Questions

I have a 1099-C from 2007, regarding a credit card debt that was canceled.

Just today, I was notified I had a collection account appear on my report. (I have credit guard watch).

I understand I have to claim the 1099-C on my Taxes as "income" on my report.

(1) Since I have to report this as "income", Shouldn't the "bad debt" be removed from my credit report since it has been canceled?

(2) If a collection agency picked up the debt, how can they put this on my credit report?

It seems I am being penalized 3x for one single instance of a bad debt.
time 1-the original mark on my credit
time 2-the collection agency that picked up debt
time 3-paying taxes on the debt as if it were "income".


Any advice on what I can do?

Thanks!

[ScottGem]

(1) The debt was cancelled correct? Therefore, why shouldn't it be listed as cancelled?

(2) If the debt was cancelled why should someone continue to try and collect on it?

[Fr_Chuck]

If they charged the debt off, and you did not pay it, it would be reported as charged off and be negative on your report. And no, a charged off debt is not removed, but would acutally be popsted as such.

Advice? Pay the debt the first itme, but it is marked on your credit report when it first is late, it will continue to be marked late on a regular basis as long as it stays late, if it is charged off, settled for less or any other action, that is reported as it happened on the credit report,
A bad debt is a continuing item, not listed once but updated time and time and time again.

[DebtProblem]

Yes, the original creditor listed it as "charged off" (back in 2003). In 2007 it was "canceled".

If the debt is canceled, doesn't that mean it's "gone"/"no longer due" (thus why I have to claim that as "income"---because it's as if someone just gave me a check to zero out that debt.

What I don't understand is why I can get penalized by this one event 3x.
"charge off" on the report, reported as "income" for 2007, and a collection agency can put that same debt on my report as a "collection"

Oh, and back in 2003 (when the account started to age). I tried to do the right thing and go through credit counseling and work out a payment plan. HOWEVER, the creditor continued to age the debt while I was in a plan.

It's plain stupid to work out an agreement, and continue to live up to my end of the bargain if the creditor will not live up to their end of the bargain. (that's just throwing good money after bad). Why pay on a "charge off" if it will do nothing to repair the derogatory information on my report. I am all about living up to my agreements, however I will only do so if the Credit granter will live up to their agreement when I go onto a plan.

If they charged the debt off, and you did not pay it, it would be reported as charged off and be negitive on your report. and no, a charged off debt is not removed, but would acutally be popsted as such.

advice ?? pay the debt the first itme, but it is marked on your credit report when it first is late, it will continue to be marked late on a regular basis as long as it stays late, if it is charged off, settled for less or any other action, that is reported as it happened on the credit report,
A bad debt is a continuing item, not listed once but updated time and time and time again.

[s_cianci]

If it is in fact a bad debt it won't go away simply because it has been cancelled. It's still on your record as just that ; an unsettled debt. However, if it in fact has been cancelled and you've received a 1099-C for it, then it should not be in the hands of a collection agency. Write to the collection agency and inform them that the debt has been cancelled, you have been issued a 1099-C and that they should discontinue any further attempts to collect from you.

[ScottGem]

When a debt is charged off, it has no bearing on your obligation to pay it. Its simply a tax maneuver by the creditor to take a loss against their taxable income. Its saying they don't feel they can collect on the debt so they are taking a loss. A chargeoff is a blot on your records since it's a statement that they couldn't get you to pay.

A debt gets cancelled usually as part of a settlement. The debtor pays an agreed upon amount and the creditor "forgives" the rest. Essentially they make a gift to you of the amount forgiven. That's why you have to pay taxes on it, because the IRS considers that gift, income to you.

If a creditor is relisting this debt, they report it to the credit report agency and tell this its been cancelled. Send a copy og your 1099 as proof.