I have a line of credit account that is now delinquent. Most recently the sent me a notice regarding a settlement. This is what the letter says: "Settle your past due account ONCE AND FOR ALL! Your current outstanding balance due on account number XXXX is $5,448.52. As of January 1, 2006, we will accept a payment of only $2996.69 to settle your account. Send in a check for $2,996.69 now and your account will be settled and closed and we will STOP ALL COLLECTION EFFORTS." It further goes on to state:" They are extending this limited-time opportunity to settle my account for an amount significantly less than my outstanding balance. When we receive your settlement payment, your account will be settled and closed and you will also avoid further negative consequences to your Credit Record." My concern is this.. can they turn around and issue me a 1099-C for the remaining unpaid balance even after offering me a settlement? When I asked them the lady first said yes but after I asked her some other questions she admitted she was unsure. I need to know because the lady stated that the unpaid balance would be $3,376.14 and this amount being reported to IRS as income would cause me to have to adjust my withholdings to zero to avoid owing a tax debt on my 2006 tax return.
