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Readina another post brought this question to mind


crash5050
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If an OC has already done a charge off/tax write off and it is listed that way on your credit report, and they are still trying to collect, could you not claim that the debt has already been satisfied by the profit/loss write off? The company could pay taxes on that money collected this year if they collected, but once it is wrote off, they have a tax credit for that that squares the deal? No?

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You put charge off/tax write off like they are one in the same. That is not the case. The law just requires they charge off no later than 180 days after default.

Charge off is just an accounting term. When they officially write it off for their tax purposes, you will (most likely) receive your 1099 forgiving the amount. That will be what you have to pay taxes on, the amount in the 1099.

I'd say 98% of the posts where somebody is getting sued, the account was charged off. They would not be suing if they had washed their hands clean of the account.

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Let me try to put it another way.

The credit card company, or whoever, has essentially loaned out money. They expect it will be repaid, plus interest, thus earning them a profit.

Prior to being repaid, the amount is carried on their books as a receivable. Investors, stockholders, and regulators will look at their books, see this as money that will be coming in, and make their various decisions accordingly.

Once it becomes apparent that the amount is not likely to be repaid, the company must report it as such (the charge off), so that their financial situation is correctly represented. The money they loaned out is now shown as a loss. This amount may offset their profits on other accounts for tax purposes (the tax write off), but by no means has the debt been satisfied. The company has taken a monetary loss.

Even after they have reported the loss for tax purposes, and lowered their taxable income by the amount of the loss, they are still entitled to attempt to collect the debt. Anything they are able to collect is now reported as profit, and they pay taxes accordingly, and it all balances out in the end.

Regards,

DH

Edited by debtorshusband
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Guest usctrojanalum

Lots of people been asking this question lately. A ton of confusing over what a charge-off actually is. Others itt have explained it very nicely.

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