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pay off write offs?


kfbratsche01
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I have a listing on my credit report for a debt that I'm validating, that I will probably have to negotiate payment for in the end. Can anyone tell me what this means? A R WRITE OFFS RE this is listed under the original creditor on my report--if this debt has been written off, and the university I owe this debt to has gotten a tax break for it, what is my incentive to pay them now? Can I still negotiate to have it removed from my report?

KFB

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I have a listing on my credit report for a debt that I'm validating, that I will probably have to negotiate payment for in the end. Can anyone tell me what this means? A R WRITE OFFS RE this is listed under the original creditor on my report--if this debt has been written off, and the university I owe this debt to has gotten a tax break for it, what is my incentive to pay them now? Can I still negotiate to have it removed from my report?

KFB

First off, welcome to the board!! Second, validation only applies to collection agencies and since this is an OC, debt validation wouldn't apply in your case. Regarding your question, a charge off is only an accounting term, it has nothing to do with them reporting it on your credit report, meaning, it'll hurt you as long as it's on there so that would be your incentive to get it off. As far as payment, that's usually the last step in credit repair. My suggestion is, read up on the board, there's tons of inforamation and a lot of helpful people to answer any of your questions.

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Swede: I'd certainly be interested in your opinion of what I'm about to say...so here's my thoughts...

First of all, its my understanding that "written off" is indeed different from the accounting term "charge off". When an OC lists an account as a write off, then they have indeed taken their tax deduction.

In either case, I'd like to suggest that kfbratsche01 might want to call the OC and demand a 1099c for the amount written off. Once they issue the 1099c they will have to report it as $0 balance. Not a great TL, but it will protect against them selling it to a JDB or any further collection efforts.

And, yes, kfbratsche01 will have to claim the written off balance as income, and pay taxes on it, but that should still be less than any settlement that might be reached.

I'm particularly concerned about this because of the new IRS regs on 1099c that I found...

http://www.irs.gov/pub/irs-pdf/i1099ac.pdf

...it has some nastinest in it about OC, CA, and JDB's issuing 1099c for their portion of the forgiven debt, and even include some provisions for debt beyond SOL.

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KFB,

If the debt is not legally recoverable and you are certain there is no possibility that you are liable for the debt, you should do nothing, IMO. It will eventually fall off of your reports. A P&L writeoff is used for accounting, but doesn't actually mean the school would receive tax benefits unless perhaps it was a for-profit enterprise. A 1099C means cancellation of debt and the IRS requires that debts forgiven in excess of $600 be reported. To the debtor this means the amount forgiven becomes taxable income. Very few creditors officially forgive debt and even fewer recipients of 1099C's ever actually owe taxes due to insolvency and other reasons.

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ghacorp In the past, I would have agreed with what you're saying, but if I'm reading the new IRS regs correctly, that might not be the case.

From what I see, the IRS is now saying that any uncollected debt over $600 requires the creditor to issue a 1099c...and then the IRS will determine whether or not the debtor was solvent. And I beleive their test for solvency is "do you have income?".

Am I reading the regs right?

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I settled an account last year with Wachovia Bank for less then the full amount.

Wachovia advised they were sending a 1099c for my income taxes and as of this date I still did not receive the 1099c.

On two of my credit reports it's reported as: Account legally paid in full 0 balance. The kicker is these two are in the positive section of my report.

Now my other report it is listed as: Settled for less then full amount and this is in the negative section, go figure.

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in the past, it was more or less up to the OC as to whether they would issue a 1099c. Now it looks as though the IRS is making it mandatory.

Can you point me in the right direction that shows this. Everything I read says if they forgive the debt, not charge it off. Thanks.

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KFB,

If the debt is not legally recoverable and you are certain there is no possibility that you are liable for the debt, you should do nothing, IMO. It will eventually fall off of your reports. A P&L writeoff is used for accounting, but doesn't actually mean the school would receive tax benefits unless perhaps it was a for-profit enterprise. A 1099C means cancellation of debt and the IRS requires that debts forgiven in excess of $600 be reported. To the debtor this means the amount forgiven becomes taxable income. Very few creditors officially forgive debt and even fewer recipients of 1099C's ever actually owe taxes due to insolvency and other reasons.

This debt is for over $600, but was incurred in 1997, and I'm not sure of the exact date that it was 'written off'. Since it seems to have been written off, is the University then responsible for sending the 1099 at the time it was deemed as such, or do they not have to do that since it seems that my account is still 'open' and with a collection agency?

How do you get them to give you the 1099? Is that a negotiable point?

What's the downside of the 1099?

Thanks for all of your input--I appreciate it!

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And, yes, kfbratsche01 will have to claim the written off balance as income, and pay taxes on it, but that should still be less than any settlement that might be reached.

quote]

What if you don't make enough money to even file taxes? Then what happens with a 1099? I assume that you still file it, but then do you pay taxes on it separately?

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mtnair: Yes...in the past...the 1099c only applied if the creditor "forgave" the debt and it was more or less up to them to decide when or if to do that. (Unless they were an FDIC insured bank, in which case their were some FDIC regs that required write off). However,

http://www.irs.gov/pub/irs-pdf/i1099ac.pdf

...from the IRS contains some guidelines that now appear to make it mandatory for any creditor. As I read this reg, it seems that if they con't make an active effort to collect, they have to 1099c.

kfbratsche0: If you don't make enough to file taxes, then you would probably qualify or the "insolvency" defense...which means you wouldn't have to pay taxes on the 1099c (all the more reason to demand a 1099c from your creditor because then you can chase away any JDB that might come after you later). The problem is...the new reg I mentioned above, seems to give the IRS the power to determine insolvency.

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mtnair: Yes...in the past...the 1099c only applied if the creditor "forgave" the debt and it was more or less up to them to decide when or if to do that. (Unless they were an FDIC insured bank, in which case their were some FDIC regs that required write off). However,

http://www.irs.gov/pub/irs-pdf/i1099ac.pdf

...from the IRS contains some guidelines that now appear to make it mandatory for any creditor. As I read this reg, it seems that if they con't make an active effort to collect, they have to 1099c.

kfbratsche0: If you don't make enough to file taxes, then you would probably qualify or the "insolvency" defense...which means you wouldn't have to pay taxes on the 1099c (all the more reason to demand a 1099c from your creditor because then you can chase away any JDB that might come after you later). The problem is...the new reg I mentioned above, seems to give the IRS the power to determine insolvency.

Thanks for the info...what would you suggest? I've started by DV'ing the collection agency, and just received in the mail a copy of my 'payment plan agreement' from the Univ, as well as a bill history--which I think constitutes as the right info to validate the debt, is it better to settle with the OC, then, for payment, and/or try to get the OC to forgive the debt and provide me with a 1099? I might make enough to file taxes, but if just barely.

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Yep...sounds like validation alright.

If it qualifies as a "Student Loan" then you might want to go over to the "Student Loans" forum and ask LynnInMN advice. Student Loans never go away, and she has extensive knowledge in how to deal with it.

If its not a student loan, then is it close to the SOL? Either way, you're almost always better off dealing with the OC. Only the OC can remove their entry on your credit reports.

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It's not a student loan, rather a tuition bill that came about due to my nievite in not signing my student loan disbursement check to apply towards the tuition one semester--and resulted in a bill owed to the Univ. Silly me--but ancient history. Apparently the SOL is coming up sometime this year, according to my TU report--however i also believe that the CA has been re-aging my account, so I'm not sure if it really should be on my report now or not, and I worry that they will continue to re-age and keep the negative listing current.

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