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I was just served with a lawsuit yesterday and it was a shock.

Here's the story. About 6 months ago I called the bank and told them I could

not make payments on a boat. They said turn it back in and I thought were

being very nice. They seemed to understand.

Two months ago I got a 1099C - cancellation of debt for the difference

between what I owed and the liquidated boat. It was roughly 14k. I thought it

was all over and it was now between me and the IRS.

Now I'm being sued by the bank for the 14k plus more expenses. The law

firm/collection agency says they can and they go so far as to tell me I'm going

to get a 1099 every year if I don't pay. I called the bank and they said that just

because I got a 1099C does not mean they can't come back after me.

I thought that a 1099C was issued when all collections efforts were to end.

Am I right? Or Wrong?

If I am right where do I find the information to use in my response to the

lawsuit.

Thanks in advance.

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Morrow,

A 1099C is exactly what the OP says, a financial institution notifying the IRS that a debt has been forgiven or canceled. This is income to the person receiving the 1099C and may or may not create a tax problem. In real general terms, if you can prove you were insolvent in the year the 1099C is issued you may not have a tax liability.

To Fiddler,

I'd suggest seeing a lawyer for this amount of money. Many lawyers recommend getting a 1099C from a creditor when you negoiate a settlement to prevent anyone from suing you for the balance. With 14K on the line, I think I'd see a lawyer. In theory, I agree this is now a tax problem but your lender seems to have a different idea.

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i bet the CA BOUGHT the bad debt and they are goin to try and collect on it. My opinion on this is.. if they sent you a 1099C then that is looking like they got their 14k in tax help and you have to count it as income. Seems hard for someone to sue you for 14k the bank already got their credit for.

Call a lawyer..soon

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