I called a bank and told them to come pick up a car back in 2001. They came and stole it in the middle of the night when all they had to do is ring the doorbell and ask for the keys. They damaged the carport with the car. I went and picked my belongings up in Irving, a 60 mile drive, at a cost of 25$.
I just received a 1099C for the tax year 2007. The IRS received a copy, but I never did. How can I be liable for the remainder of debt, when we gave them the car back and they had already sold it when I went to pick up my belongings?

Probably what happened is they sold the car at auction for less than what you owed on the loan, and hence the forgiven portion of the loan is considered to be income to you.