Try4Gr8Credit

How much did they buy the debt....

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.....Once the OC has determined that the debt is no longer collectable via their normal methods...and, has done whatever voodoo accounting they do to reconcile that fact with their profit and loss statement and included an adjustment to their income tax burden...and the OC "sells the right to collect that debt" to a JDB, do we have a "moral" obligation to pay the JDB anything? I don't think so.

There is no "voodoo" about it...such accounting is stringintly regulated by the SEC and the AICPA.

When a consumer doesn't pay their legitimate debts, the OC gets screwed...it's just that simple.

...Bottom line...JDBs can indeed legally "buy" the rights to collect a debt from and OC. The amount they pay for those right is immaterial. However, if they don't also buy the complete documentation of the debt including complete accounting, they may not win in court.

The best way to avoid JDB's and all the unplesant things surrounding them is to either for consumers to pay their debts or, better ides, don't go into debt in the first place.

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There is no "voodoo" about it...such accounting is stringintly regulated by the SEC and the AICPA.

When a consumer doesn't pay their legitimate debts, the OC gets screwed...it's just that simple.

Yes, accounting practices are regulated. But so are the courts. And we have the best courts money can buy. The same applies to accounting practices. (ENRON for example?)

And, yes, a consumer should pay legitimate debts. But, when they don't, the OC's accounting practices see to it that the people that get screwed are the other debtors, the minor investors, and the US taxpayer.

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Yes, accounting practices are regulated. But so are the courts. And we have the best courts money can buy. The same applies to accounting practices. (ENRON for example?)

And, yes, a consumer should pay legitimate debts. But, when they don't, the OC's accounting practices see to it that the people that get screwed are the other debtors, the minor investors, and the US taxpayer.

willingtocope, bravo for hitting the bullseye, as you usually do!::allhail::

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In this world of selling "debt" for fractions of a %, one isue seems to get lost in the shuffle.

The OC did NOT sell the debt for $.004/$1, no, instead the OC wrote the debt off it's TAXES for ~ 28%. Legally that debt ceases to exist, the debtor is on the hook for imputed income (Debt written off x % debtor tax rate).

IRS rules state writing off the debt DISCHARGES the debt. You don't get to claim it, take the 28% tax break off your corporate tax burden and then turn around a SELL the very same debt as if it hadn't been written off.

I know the industry is doing this, but that doesn't make it legal. The OC accepted payment from a third party to settle the FULL AMOUNT in exchange for 28% cash in the form of lowered tax burden.... a penny saved IS a penny earned.

The JDB's are all being DEFRAUDED pure and simple. The alleged debt is not valid and has value at most equal to what the JDB paid for it.

The definition of DISCHARGE in IRS code is the same definition as DISCHARGE in the Bankruptcy law. The debt is effectively SOLD TO UNCLE SAM outright. The IRS now has a right to collect.... based on the imputed income of the DISCHARGE (forgiveness) of debt. That alleged debt now belongs to the US TREASURY, not any JDB, etc.

Your affirmative defense against the JDB in this argument is "Payment and Tender", that the debt has been paid by the IRS in full. And that the JDB is suing the wrong party, the party at interest here is the OC who defrauded the JDB in the first place.

Think about the pure logic of the situation. the OC took the writeoff (write off, not charge off, they are different). The OC sold the debt to the IRS who now has legal authority to collect from your hide with all the power of the IRS. And yet somehow there is also this JDB who allegedly owns the SAME debt and can collect as well.... opening the door to you having to PAY TWICE!!!! Makes no sense at all.

The choice to me is simple, either pursue collection OR write it off thier taxes, but they CANNOT do both. So through discovery you need to find out if the OC (or hell, a JDB) wrote it off thier taxes, and if so then what are we doing here in court over a non-debt you dont own?

To now continue to insist you own the debt and have the right to collect it is... FRAUD ON THE COURT as there is no debt for you to own, and insisting you do and the debtor owes you is fraud. Yes poor little JDB, you were defrauded by the OC, but that is no excuse for further defrauding the debtor to "get even".

At least that is my take on the big picture of this debt selling universe.

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IRS rules state writing off the debt DISCHARGES the debt. You don't get to claim it, take the 28% tax break off your corporate tax burden and then turn around a SELL the very same debt as if it hadn't been written off.

I don't think that statement is accurate. Can you support it? Exactly where in the Code does it say that?

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The notion that only legitimate debtors get targeted by JDB's is total hogwash. I'm my case, I shocked, stunned, and surprised when I got that welcome as a new client letter from asset.

Here it is some four years later and I still have no idea exactly why I was welcomed as a new client because, as far as I can see, it was a totally bogus debt.

But thank God for this forum which got me up to speed on my legal rights and obligations. And I certainly was not going to pay a bogus debt, I was not going to tolerate them hanging it over my head, and did not want the expense of suing asset. Fortunately I had a descent state AG,

who basically asked asset in subpoena form, what the hell are you talking about, and asset had to not only admit they were clueless themselves, they also had to eat the paper and pledge I would never be bothered over this matter again.

Nor am I the only one unfairly dunned by JDB's with no documentation. I am disgusted that these extortions and con artists called junk debt buyers are allowed to operate and evade jail. I can sympathies with them if they have quality documentation, but if they don't, they can go to hell as far as I am concerned.

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Feel Violated, I am with you.

For those of us that have been hounded by JDBs for debts that were not ours, the system is a big problem.

I have had to DV the same debt up to five times in the last few years. It is not mine, I send my DV letter, do not hear from that JDB again; but hear from another one on the same debt. Often the new JDB is owned by the same parent company as the previous JDB.

My DH had a debt that he disputed and refused to pay to the OC because of gross overcharging and billing at a rate different from the contract. There was voluminous correspondence about it, including a letter from DH's attorney to the OC. The OC sent the debt to a CA. When the CA sent collection letters DH &/or his attorney sent a strongly worded letter back, and the CA never responded. This account has gone through 4 CAs and we hadn't heard from anyone about it for 3 years. It is now 10 years old, and we just got a letter from a JD about it.

It is not always about people who do not pay their legitimate debts. Just because a CA or JDB is going after a debt does not mean that it is a valid debt.

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Yes, accounting practices are regulated. But so are the courts. And we have the best courts money can buy. The same applies to accounting practices. (ENRON for example?)

And, yes, a consumer should pay legitimate debts. But, when they don't, the OC's accounting practices see to it that the people that get screwed are the other debtors, the minor investors, and the US taxpayer.

Enron...what a greaaaaat citation...where just about every executive including the CEO ignored the laws governing their accounting practices :roll:

Despite your cynical attitude, the overwhelming majority of businesses in this country not only follow the laws but spend untold millions of dollars to make sure they do so...there is nothing about accounting practices that "screw" anyone.

The only entity who really gets "screwed" when a consumer doesn't pay his debt is the creditor/business who was owed the money but yes, all consumers loose too because like all other cost, they ultimately get passed on to the consumer in the form of higher prices, higher interest rates, higher fees, etc., etc.

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In this world of selling "debt" for fractions of a %, one isue seems to get lost in the shuffle.

The OC did NOT sell the debt for $.004/$1, no, instead the OC wrote the debt off it's TAXES for ~ 28%. Legally that debt ceases to exist, the debtor is on the hook for imputed income (Debt written off x % debtor tax rate).

IRS rules state writing off the debt DISCHARGES the debt. You don't get to claim it, take the 28% tax break off your corporate tax burden and then turn around a SELL the very same debt as if it hadn't been written off.

I know the industry is doing this, but that doesn't make it legal. The OC accepted payment from a third party to settle the FULL AMOUNT in exchange for 28% cash in the form of lowered tax burden.... a penny saved IS a penny earned.

The JDB's are all being DEFRAUDED pure and simple. The alleged debt is not valid and has value at most equal to what the JDB paid for it.

The definition of DISCHARGE in IRS code is the same definition as DISCHARGE in the Bankruptcy law. The debt is effectively SOLD TO UNCLE SAM outright. The IRS now has a right to collect.... based on the imputed income of the DISCHARGE (forgiveness) of debt. That alleged debt now belongs to the US TREASURY, not any JDB, etc.

Your affirmative defense against the JDB in this argument is "Payment and Tender", that the debt has been paid by the IRS in full. And that the JDB is suing the wrong party, the party at interest here is the OC who defrauded the JDB in the first place.

Think about the pure logic of the situation. the OC took the writeoff (write off, not charge off, they are different). The OC sold the debt to the IRS who now has legal authority to collect from your hide with all the power of the IRS. And yet somehow there is also this JDB who allegedly owns the SAME debt and can collect as well.... opening the door to you having to PAY TWICE!!!! Makes no sense at all.

The choice to me is simple, either pursue collection OR write it off thier taxes, but they CANNOT do both. So through discovery you need to find out if the OC (or hell, a JDB) wrote it off thier taxes, and if so then what are we doing here in court over a non-debt you dont own?

To now continue to insist you own the debt and have the right to collect it is... FRAUD ON THE COURT as there is no debt for you to own, and insisting you do and the debtor owes you is fraud. Yes poor little JDB, you were defrauded by the OC, but that is no excuse for further defrauding the debtor to "get even".

At least that is my take on the big picture of this debt selling universe.

I think you should invest in a new camera - the above Bovine Scatology is so off-the-wall and absolutely WRONG that it's astounding.

I'll bet you also don't think you have to pay income taxes because it's unconstitutional don't you. :ROFLMAO2:

There simply is no "tax break" for a company writing off a debt...since the concept/consequences really aren't all that complicated, I can only conclude that most of those who don't understand that simply don't want to understand.

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For the record, I believe in the constitutionality of income tax.... and double so for the very wealthy.

So let me get this striaght, according to you:

I'm Capital One Bank, I have $100 million in gross revenues for the year. So I pay my corporate income tax of (dunno, 20%?) on the $100 million.... or $20 million.

At no point do I write off and deduct the $10 million in defaults for the same year, yeilding a mere $90 million in gross revenues, with a corporate tax bill of $18 million.

At no point do I pay $2 million LESS in taxes because I wrote off the defaults, and in no way do I therefore recieve a "tax break".

At no point is that accounted for at the IRS by Capital One having filed bundled 1099c forms for the debt forgiveness of the defaults.

And at no point is the individual taxpayer/alleged debtor now legally on the hook for the "imputed income" that the forgiveness (aka DISCHARGE) reflects.

So according to Robert Nashville, no taxpayer/alleged debtor need ever worry about having to pay the IRS the taxes due for this imputed income, that apparently never occured.

And above all, the creditor is free to still collect on this debt, despite the fact it was written off, or then sold to a JDB who can collect on it.

And at no point would the alleged debtor/taxpayer ultimately be paying BOTH the tax owed on the imputed income AND the original debt..... you know, the original debt, the forgiveness/DISCHARGE of which generated the imputed income that taxes are now owed on in the first place.

Is that what you are trying to tell me, Robert?

I bow to your superior accounting knowledge.

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I have owned a used car dealership in the past and my accountant did write off bad debt ( buyers whom I financed internally that skipped town) on my taxes and we did get a break..it was included in business loss...just fyi

Then it's a good thing you had an accountant do it for you because it doesn't sound as if you understand the process.

You got no "break" on your taxes...the best a business can EVER do on income taxes is break even...claiming a subsequent loss on a transactin only serves to offset some of the gain you had previously because of the transaction.

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Then it's a good thing you had an accountant do it for you because it doesn't sound as if you understand the process.

You got no "break" on your taxes...the best a business can EVER do on income taxes is break even...claiming a subsequent loss on a transactin only serves to offset some of the gain you had previously because of the transaction.

That is what I was referring to..sorry I didn't make it clearer...I offset my profits with writing off the bad debt( even though I did make it up by wholesaling the vehicle at an auction in most cases, the vehicles I could recover anyways) But the IRS allowed me to use the bad debt loans as a loss, even though in some cases they weren't, so I did and came out very pretty in most cases because it was that much more that I didn't have to pay in taxes... ;)

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That is what I was referring to..sorry I didn't make it clearer...I offset my profits with writing off the bad debt( even though I did make it up by wholesaling the vehicle at an auction in most cases, the vehicles I could recover anyways) But the IRS allowed me to use the bad debt loans as a loss, even though in some cases they weren't, so I did and came out very pretty in most cases because it was that much more that I didn't have to pay in taxes... ;)

Ok but understand, you can only claim losses on the "loans" up to the amount of profit you originally reported and paid taxes on...any "profit" you subsequently received on wholeselling the vehicles you woudl have paid taxes on that income once it occured.

Where people often get confused is when multiple tax periods are involved...you might pay income taxes on the profits from a sale in 2005 but not have a related loss to report until 2008...in the end, the adjustments simply bring the business back to a point so that they aren't paying taxes on income they don't actually make. :)

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Ok but understand, you can only claim losses on the "loans" up to the amount of profit you originally reported and paid taxes on...any "profit" you subsequently received on wholeselling the vehicles you woudl have paid taxes on that income once it occured.

Where people often get confused is when multiple tax periods are involved...you might pay income taxes on the profits from a sale in 2005 but not have a related loss to report until 2008...in the end, the adjustments simply bring the business back to a point so that they aren't paying taxes on income they don't actually make. :)

Believe me, you aren't telling me anything new brutha. :) I worked it to my advantage just as any other business would do. ;)

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IRS rules state writing off the debt DISCHARGES the debt. You don't get to claim it, take the 28% tax break off your corporate tax burden and then turn around a SELL the very same debt as if it hadn't been written off.

Section 6050P of the Internal Revenue Code (Code) for discharges of

indebtedness is the place to start looking into how writing a debt off you taxes plays out with the IRS.

Wack

I got in trouble with the admin for implying your were a wingnut. At the risk of more trouble, I think I inadvertently insulted wingnuts. I do not intend that as a personal attack -- I am just struggling for a way to describe how off kilter your thinking and analysis is.

The section you reference is nothing more than the guidelines for what organizations are required to issue 1099c and when. Absolutely none of this has anything to do with the internal accounting of the bank.

I was an executive officer of a bank for a great many years. At various times, I was responsible for evaluating and managing the bank's loan loss reserves and loan portfolios. As a result, I have hands on knowledge of how banks account for their revenues and expenses.

In the most simplistic sense, the bank adds up all their income and subtracts all their expenses and pays taxes on the difference. It is never quite that simple because of accrual accounting and the manner a financial institution establishes loan loss reserves. But, for our purpose here, none of that is important and it is helpful to keep it simple.

When the bank recognizes a loss on a loan, they deduct that loss from their income. Makes perfect sense. In other words they "write it off" or "charge it off" the loan. Those are accounting terms. It does not mean the debtor no longer owes the debt -- just that the bank is not allowed to carry the asset on their books at a value higher than zero. Writing off the debt in no way discharges the debt.

The bank does not get a "tax break" on the charge-off. It is a reduction of income. Since they bank pays taxes on their net income, the tax bill is reduced because of the write-off -- but that is all. Again, makes perfect sense.

If at some later time the bank recognizes income from that charged-off loan -- either by collection or by sale of the loan -- those proceeds are added back to income. And since income was increased, the banks taxes were increased.

The issuance of the 1099c is not triggered by any of the preceding. The 1099c has different triggers and happens much much later. The issuance of the 1099c has zero impact on the books of the bank or the taxes paid by the bank -- the bank has already accounted for their revenue and losses as I described above.

The 1099c creates a taxable event for the debtor. It is ironic that the accounting loss at the bank and the taxable event for the debtor almost always take place in different accounting periods. That is just the way it works.

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No insult taken.

I agree with you 100% on the accounting lesson. My point is for a consumer faced with a lawsuit, to use every weapon in the arsenal. One of those weapons is the common law "Payment and Tender" defense.

Legitimately (aka NON-FRIVOLOUSLY) arguing the Payment and Tender affirmative defense in court is the motivation behind this thought process. At this point you HAVE BEEN SUED. As a consumer advocate I'm just trying to highlight potential fronts in the war on collection.

Say I allegedly owe BoA $10,000. They charge it off, and then they write it off their taxes. Thier income is reduced by $10,000 from the loss and say they have a 20% tax rate... they receive a $2,000 reduction in tax obligation. Cold hard cash money.

As the consumer, if I'm in court facing this alleged debt, I want to use DISCOVERY on BoA ( or thier CA or JDB) to establish they filed a 1099c for the $10,000, what thier tax rate was, and establish that they received a $2,000 reduction in their tax burden. A payment in the legal sense of a payment, something (debt forgiveness/discharge, the right for the IRS to collect on taxes on the imputed income) in exchange for something of value ($2,000 reduction in tax owed).

This establishes for the CONSUMER the predicate for the common law claim of Payment and Tender. That the Creditor accepted at the time they filed the 1099c a payment or compensation of $2,000 from a Third Party (the US Treasury/IRS) in exchance for the debt.

The IRS language is clear that filing a 1099c constitutes a DISCHARGE (forgiveness) of the debt, and the IRS code uses the same definition as the US Bankruptcy court for "DISCHARGE". Further, this discharge transfers to the IRS the right to collect taxes owed for the imputed income that the debt forgiveness/discharge creates.

I realize fully what the industry DOES and wants to do, and that the industry would love to still also collect on the debt as well as also sell it to a zillion JDB's. And I'm sure (knudge knudge wink wink) they will file anamended tax return reflecting the income from collecting and clear the 1099c filed.

But from the consumer point of view, in the struggle in court, I want to argue the case that the creditor has in fact DISCHARGED the debt legally and in fact should NOT be continuing collection or seeking further compensation and that in fact if the debt IS legally discharged under the IRS code, and that the lawsuit itself is unlawful and a FDCPA violation as it would be had the SOL been expired.

Im not saying IRS or accounting or any other law says this outright, I'm advocating using the circumstances and IRS code to set the predicate for the state common law defense of "payment and tender". Arguing that the event of the creditor writing it off thier taxes and filing a 1099c is a trigger point beyond which collection should end because the debt is DISCHARGED by the creditor in exchange for PAYMENT by a third party.

I'm saying use the discovery process to dig into these matters, and if the creditor (or more importantly JDB) doesn't come up with the items requested, you end up with a potential to succeed in your payment and tender defense. Using this against BoA may not be as strong as it can be against a JDB who is at a serious disadvantage in obtaining the records/cooperation of an OC like BoA after the debt has long since been sold off. BoA or other OC isn't likely to want to hand out thier internal accounting documents to help some Junk Debt Buyer who paid $.40 for the listing to collect.

Mind you, the creditor didn't HAVE to do this, there is no law forcing the bank to actually write off the debt, and one of those "events" for filing the 1099c is stopping ongoing collection activities. So the creditor can in fact save itself from ever having to file a 1099c simply by continuing collection activities in good faith.

The industry wants it ALL ways at ALL times. They want to write it off and improve THIS QUARTER financials by claiming the loss AND they want to continue collecting, AND they want to sell it to JDBs and.... etc, etc.

Mind you, filing a 1099c is not a trivial matter. If the consumer is not INSOLVENT at the time (and this is why WHEN IS important) then the consumer could be on the hook for the tax laibility on imputed income. I'll also point out that seldom is the consumer ever sent a copy of the 1099c in this casual bundling writeoff process, but if AUDITED the IRS can find it and hit the consumer for interest and penalties for all the time since it was filed that the consumer didn't bother paying the taxes owed on the imputed income.

The creditor may not care when it files, but in reality the effect of a large disconnect between when the imputed income actually occured and when the 1099c claiming the imputed income is filed can lead to an insolvent consumer being on the hook for taxes they shouldn't be responsible for, and others being on the hook for interest/penalties they didn't see coming.

Do you understand now WHY I advocate this approach as just another bullet in the gun for fighting collections, especially in court. Worst case, the judge doesn't find it a persuasive argument, but it is NOT a frivolous argument.

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…Say I allegedly owe BoA $10,000. They charge it off, and then they write it off their taxes. Thier income is reduced by $10,000 from the loss and say they have a 20% tax rate... they receive a $2,000 reduction in tax obligation. Cold hard cash money.

I don't know if you simply refuse to understand how income taxes work for a business because you want to keep using this erroneous belief to justify your "consumer advocate" mindset or if you just can't understand, but you are absolutely wrong.

The bank has made nothing as in ZERO.

If this is a multi-period issue (and they almost always are) then their "reduction" in tax obligation only offsets the taxes they previously paid on their reported and now non-existent profit. If both the anticipated profit and the now known loss of that profit happen in the same tax period then they simply don't pay taxes on the profit they were hoping to make.

They break even on taxes, nothing more.

As the consumer, if I'm in court facing this alleged debt, I want to use DISCOVERY on BoA ( or thier CA or JDB) to establish they filed a 1099c for the $10,000, what thier tax rate was, and establish that they received a $2,000 reduction in their tax burden. A payment in the legal sense of a payment, something (debt forgiveness/discharge, the right for the IRS to collect on taxes on the imputed income) in exchange for something of value ($2,000 reduction in tax owed).

This establishes for the CONSUMER the predicate for the common law claim of Payment and Tender. That the Creditor accepted at the time they filed the 1099c a payment or compensation of $2,000 from a Third Party (the US Treasury/IRS) in exchance for the debt.

The IRS language is clear that filing a 1099c constitutes a DISCHARGE (forgiveness) of the debt, and the IRS code uses the same definition as the US Bankruptcy court for "DISCHARGE". Further, this discharge transfers to the IRS the right to collect taxes owed for the imputed income that the debt forgiveness/discharge creates.

The assertion that the issuance of a 1099 removes the obligation of the consumer to pay the debt is equally wrong which is why courts routinely make debtors pay debts that have had 1099s issued.

Mind you, the creditor didn't HAVE to do this, there is no law forcing the bank to actually write off the debt

Wrong; any publically held business must write off bad debts and there is an alphabet soup of Federal agencies and private governing bodies that say so.

It's great to have a "consumer advocate" mindset but making wild and unsupportable claims and arguments based on bad interpretations of the law will never help a consumer in court unless the judge is a moron (which, unfortunately, some are).

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I'm no expert here in any of the above matters, but here's my take on it.

The assumption that the OC is not making any money by way of charge-off is entirely correct. It goes like this, Projected profit filed with alleged debt included. Debt becomes inactive and charged off as a business decision, "tax break" is given in the amount of the debt charged off that was originally claimed as profit (projected). So, if in one quarter the bank filed with this as profit, they paid taxes on it. When they charge it off, they don't pay said taxes, or if they hadn't paid taxes on it, then they are relieved from doing so. (It's kind of like, for those legally minded, filing a motion to amend your profit statement). Then, when they actually do collect money on it, they are again responsible for paying taxes on it. Easy enough to follow, and logically follows that the business breaks even.

However, what I believe uwackme is arguing, is that at the instant a collector is suing for the money, the debt has been accounted for in terms of the consumer. The example is that the IRS sees this as profit/income for the consumer at the time the bank/creditor writes it off. In the eyes of the iRS, the debt itself is a non issue, but the taxes on the debt need to be charged to someone as a profit.

Now here's where it gets sticky in my opinion. It seems the consumer is asked to uphold two responsibilities at the same time which are directly contradictory. If the consumer must pay taxes on it per a write/charge off, then the debt has been satisfied except for taxes according to the iRS. However, at the same time, a collection agency or JDB is asking for payment. It's a catch-22 from what I can reason. The implication to pay taxes by the consumer, negates the necessity to pay the debt, and the implication to pay the debt, negates the necessity to pay taxes on the debt as income/profit.

Seems this whole system needs to be adjusted.

As far as a legal defense goes, it may be totally plausible to show this as a catch-22, and argue for enforcement of the most favorable responsibility in the eyes of the state or defendant. Of course IRS revenue SHOULD supersede the need of a JDB to get paid....Just a thought.

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