Purchased Debt Question

[hannah]

Is there any caselaw about paying only what the purchaser of charged off debt paid for the debt from the original creditor? The orginal creditor charged it off and then would have been recompensed by a tax deduction or even insurance against the default, so the debt should only be collectable for what was paid for it....RIGHT?? I would like to bring this up in my case but need case law to back me up. Thanks in advance for any thoughts on this.

[candydandy]

Good question! I would like to know this as well.

Besides it only makes sense.

1-Original Creditor charged off full amount of debt and received tax break for full amount.

2-Original Creditor then turns around and sends me a 1099Misc at end of year, so now I have to claim full amount of charged off debt on MY taxes as if it was income I had received, which means it may put me in a higher tax bracket, and which I WILL have to pay taxes on.

3- Original Creditor sells my account for a small percentage of the debt. They make tax break, and get paid from junk debt collector.

4- Debt collector now attempts to collect FULL amount of debt from debtor.

5- If junk debt buyer is successfull in suit, then:

a- I have to claim full amount of debt on my taxes as if it was actual money received the previous year from Original Creditor.

b- I have to pay taxes on the full amount of the debt when I file my income taxes at the end of the year.

c- I have to pay the Junk Debt Collector if I lose in court, so actually, I am paying for the full amount of the debt TWICE!

[DocDon]

Coppola v. Arrow Financial Services, 302CV577, 2002 WL 32173704(D.Conn., Oct. 29, 2002) – Information relating to the purchase of a bad debt is not proprietary or burdensome. Debtor must phrase their request clearly to obtain: The source of a debt and the amount a bad debt buyer paid for plaintiff’s debt, how amount sought was calculated, where in issue a list of reports to credit bureaus, and documents conferring authority on defendant to collect debt.