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Continued Charging of Interest After Write-Off


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In the last couple of years, we have gone through some bad financial times including job loss and medical problems. During this time we have done our best to keep up with bills, but some things have been impossible to keep up on. It has always been my position to these companies that I fully intend on paying the amount back but needed some temporary relief. Few have been receptive.

Our credit card (whose name I will refrain from using but starts with Cap and ends with One) debt was written-off by the company. I fully understand that I am still responsible for the amount; however, I told the rep that the most I could do right now is $30 a month and would be glad to review it with them on a regular basis for possible increase. They told me that wasn't enough because the account was being charged about $60 a month in interest.

Once a debt has been written-off the books of a company, is it really expected that further interest will be accrued?

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Short answer is "yes". As with most things in the CC world, "charge off" doesn't mean what we think it should. CO really only means that they MAY have taken a charge against income for tax purposes. Doesn't mean the account is closed...only that you can't use it anymore, but they can continue to charge interest and penalty.

There are some FDIC rules that apply to member banks (it isn't really clear if the Crap1 CC issuing arm fits in that definition) that implies if a delingquent account goes beyond 180 days, then it is no longer collectable. There are also some recent IRS rules that imply that if the OC doesn't attempt to collect an account, then they must close it after 3 years or so and issue you a 1099c for the "income"...at which time the account becomes uncollectable.

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Mr. Willing... If OC stops collection activites,

three years later the OC must close

the account and issue a 1099c?

Would that put a stop to CAs attempting to

collect on an alleged debt since the IRS is,

in theory, going to benifit from the consumer's

payment of the debt in income tax?

I'll pay the IRS rather than the bottom feeders...

Not seeking an answer, just amazed...

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Not quite that simple. The IRS just changed the rules in 2005, and it really hasn't been through the courts yet (I think)...and, since the IRS implies that the OC has 3 yrs (or so) after the last attempt to collect, it could actually drag on for a long time.

I have suggested that if an OC says "sold to another lender" on your CRs, you might demand that they send you a 1099c at that time. In effect, they've written it off completely, and the JDB who bought it only paid them pennies on the dollar. Once you get a 1099c, you should be able to pay your taxes, and then waive it at any JDB that comes after you saying "...this debt is satisfied, and therefore uncollectable...".

Honestly,I don't know if that works or not...

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Thanks willingtocope, I have a CO W/ HSBC that has gone to Arrow, a bunch of semi straight shootin' morons (more semi than straight), I am going to my local IRS office and get an explanation of 1099c. This account is from 11/2000 w/ dola (Arrow has reaged by 2 years) 5/ 2002 (according to Arrow) so not much to lose either way and of course Arrow doesn't bother to Validate... I'm buliding a pretty strong case on them

including the Arrow v. Coppola RE: how much Arrow paid HSBC for acct. etc... Just a bunch of long drawn out BS... but, I see HUGE value in the education... I have a police report RE: ID theft... but I want to shut their arrogance through the front door... somewhat vindictive but... I LIKE IT.

If you would like I'll post my IRS findings today... How many different ways can I say NOT MINE?

BTW, I have learned Mountains fom all your posts... thank you for your willingness to help us all.

Thank you...

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I'm not familiar with the specific rule you are referring to Willing, but I doubt that the IRS is trying to determine the collectability or un-collectability of a debt. I believe they are simply trying to get around the frequent situation where an OC (or more likely some JDB) has effectively forgiven the debt (by virtue of stopping collection action ) but never issues a 1099. This puts a time limit on the process that hasn’t been there before…as long as the current debt holder tries to collect the rule would not come into play.

Aside from that, the issuance of a 1099 by the debt holder (be it the OC or a subsequent debt holder) does not make the debt uncollectible - it has always been true that a consumer should NEVER have to both pay a debt and pay taxes on income based on the debt being forgiven but all that is needed to remedy that particular situation is for whoever issued the 1099 in the first place to re-issue a corrected 1099 - no harm no foul.

An OC can not issue a 1099 on a debt it has sold...the basis for issuing the 1099 is that the debt has been forgiven; selling it is not forgiving it; they’ve simply sold their rights/interest to another party but the debt still exists.

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I do not know if this is the correct fourum... if not please advise...

On my CR dated 4/25/06 and every CR since then to the most current dated 6/21/06 (6 CRs in total) All entries from HSBC state:




Date Open: 06/ 2000

Date Closed:06/ 2001

Date Paid:05/ 2001

(caps and bolds per Report) Clearly an old account during a time my wife had passed, and I do not know if, due to meds, I paid HSBC or not...

(Yes, STRONG meds). Is this reported trade line indicating a PAID account as far as HSBC is concerned? I have no records from that time period, but have regained my senses... any help, much appriciated.

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Here's the links to the appropriate IRS forms...



...be sure and dust off your gibberish to english dictionary.

Honestly, it's been like 6 months since I last read through this, and, I'm not certain, but it does look like they may have firmed up the rules a bit. As Robert_Nashville says, it isn't really clear whether a 1099c would protect you from lawsuits by a JDB but it does imply that unless the OC passes the debt to a "related" party, they have to issue a 1099c.

At any rate, if I had a debt I couldn't pay, I'd either do the BK route (which I did) or demand a 1099c at CO. I'd gladly pay the IRS 15-28% rather than a JDB. And, if I did get sued, I'd show up in court with the 1099c saying "the IRS says I got this as income..I don't owe nobody nothing".

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