Jenniferinneed

Legality of charged off accounts?

Recommended Posts

I was wondering HOW these junk debt buyers are legally even able to buy charged off accounts for pennies on the dollar, let alone charge the full rate and interest IF the debt can

be proven valid.

A Credit card company who charges off an account uncollected is able to write off that loss to the IRS, isn't that true?

Once the credit card company writes off this loss to the IRS on taxes, they get credited ( basically ) in what they must pay in taxes as to profits, right?

If the Credit Card company has written the account off as a loss and in turn they paid less income tax on their profits, this raises the question of legality in my opinion.....

A tax write off that is being sold to JDB, and then being collected on later through judgments or whatever means they take seems like double dipping to me, no one is allowed to double dip, but it seems there is a major conflict of interest in how CC and JDB are doing business.

Can anyone enlighten me please.

Link to post
Share on other sites

It is really apples and oranges.

I am no tax accountant but, as I understand it, the OC writes off the debt as uncollectible and gets a tax benefit for the amount of the debt less what some JDB pays for it. If a JDB collects the entire amount, it would pay taxes on that amount less what it paid for the right to sue plus its collection costs. And if the debt is forgiven entirely, you may receive a 1090-something or other because it is a financial benefit to the debtor.

But none of this has anything to do with liability for the underlying debt. The debt isn't "reduced" by a tax credit to the OC any more than it is partially "satisfied" by the debtor's tax liability for debt that was forgiven.

Link to post
Share on other sites
It is really apples and oranges.

I am no tax accountant but, as I understand it, the OC writes off the debt as uncollectible and gets a tax benefit for the amount of the debt less what some JDB pays for it.

Yes,that sounds right. A tax break, bailout and who knows what else. After which, the debt was charged off, written off. DEAD ISSUE, except they sell this to DJB and from there........

If a JDB collects the entire amount, it would pay taxes on that amount less what it paid for the right to sue plus its collection costs.

But the DJB is claiming rights to entire amount of original debt and collecting in many cases. They sue under a clause as a successor to a debt, and demand payment of full amount, an amount that is arbitrary and DEAD ISSUE since it was written off prior with the IRS.

And if the debt is forgiven entirely, you may receive a 1090-something or other because it is a financial benefit to the debtor.

But none of this has anything to do with liability for the underlying debt. The debt isn't "reduced" by a tax credit

No, but there is a risk with all business and all business take profit and loss as to same risk. Sometimes business is good, sometimes not, and the IRS allows a company or business to write off a loss and that is SUBTRACTED from the money they would have to pay the IRS for the profits they made on other business transactions.

to the OC any more than it is partially "satisfied" by the debtor's tax liability for debt that was forgiven.

What if I am a plumber and I have a contract with a customer and they do not pay the fees for services, am I allowed to wrote that off on my taxes and turn around and sell my LOSS of money to a debt plumber collection firm, let them try to collect? Seriously, there is something wrong and I could probably come up with much better analogies, however I think you see the point, but worse yet is these JDB are scamming innocent people with no proof of any debt except they said so and now doing it with fake affidavits@

Link to post
Share on other sites
but worse yet is these JDB are scamming innocent people with no proof of any debt except they said so and now doing it with fake affidavits@

THAT is the real issue. The rest is between the banks/JDB's and the IRS.

Link to post
Share on other sites

I "think" there is a serious legal issue IF one could prove they were paid the amount in insurance/write offs/JDB purchase price and the "whole securitizaion deal" is "iffy at best" (legally IMO) As I understand it one must show "damages" and one certainly is not damaged when they made a profit overall.....

"I" would not care to be the one to test all that in court, but methinks would be interesting IF one had all the proof they'd need to show what actually did in fact take place in several (if not all) these CC cases......

Link to post
Share on other sites
What if I am a plumber and I have a contract with a customer and they do not pay the fees for services, am I allowed to wrote that off on my taxes and turn around and sell my LOSS of money to a debt plumber collection firm, let them try to collect? Seriously, there is something wrong and I could probably come up with much better analogies, however I think you see the point, but worse yet is these JDB are scamming innocent people with no proof of any debt except they said so and now doing it with fake affidavits@

Once the OC sells the debt, that's it. They don't get anything else from the JDB. If the JDB collects anything, the JDB gets to keep it.

Link to post
Share on other sites

We have been down this road way to many times already. They do not get a tax break from the "write off". There is a HUGE difference in Accrual accounting methods than there is in how you keep a check book. If you attempt to understand accrual accounting you would understand what is going on. The write off is a reconsiliation of *projected* profits against realized losses.

  • Like 1
Link to post
Share on other sites
Guest
This topic is now closed to further replies.