My wife decided to stop using and close her 6 credit cards totaling $80,000 in 2002. When she informed the credit companies of what she was doing she also stated that she was going to only pay on the ones she could afford to pay. I as a new husband to her in 2002 I gave her enough cash so she could settle in full on three of the cards which totaled $49,000. I didn't have the resources to help any further for several years and one of the creditors Chase Bank was #6 in line to get their money. They didn't want to wait for their turn so they first charged off the debt which had climbed to $17,300 in 2003. Then they sent her a 1099 stating the money was a gift, so we got a notice from the IRS requesting $4600 in income tax. We paid that. Since then we settled on all of the accounts. My wife checked her credit back in 2005 and noticed that Chase Manhattan Bank had taken her old charged off 1099 credit card account and sold it to a Collection Agency and made it a new debt. We hired a lawyer, he sent that collection agency a letter with proof of what Chase had done so the collection agency sold the debt to another Collection agency and the whole mess is starting all over again

After Chase did this my wife called them asking to pay the debt and they said that they had no interest in collecting the debt since they had charged it off and had given her a 1099/ a forgives of debt. We have disputed the debt with Equifax and the other two and are told by them that their investigation concludes the debt is valid.

I would pay the debt but I am not going to pay the credit card and $4600 to the IRS if it wasn't income. Can someone please help with a good course of action?

Actually they can "write it off" and send you a 1099 for the write off, and then still try and collect if they want to. The write off is for their tax purpose but does not take away any legal liabiltiy of a valid debt and does not stop them from future collections if they wanted to.

So yes the debt is valid, although it appears the person who is owed the debt does not want to be paid on it. So basically you wait and it will come off the report after 7 years anyway.

But we get people on here all the time that have that same issue when they latter end up with a garnishment on the debt that was written off earlier.