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Post Judgment 1099C


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So today I was served with an Order to Appear for a Proceeding Supplement Hearing in June for a judgment that Capital One has against me from 2009. ( I didn't know about this wonderful website back then).

 

I received a 1099C for this debt from Capital One in January with the triggering event being December 2012.

 

Has anyone been in a situation like this before?

 

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I've had a 1099-C but, I have never had to appear in any court. If you have already filed your taxes, and I expect you have. You will need to file an amendment. If I recall, 1099's are suppose to be sent out no later than Feb. or March. I may be wrong on that.

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Just a quick question. If you received a 1099C this usually indicates you are the recipient of some kind of payment or that you have earnings that tax has not been withheld from. This could also be a settlement in which you were the beneficiary such as a credit card lawsuit in which you won and the OC issues you a 1099C to offset the unpaid taxes. 

 

So my question would be did you win, did they settle, or is this thing still ongoing. If it's ongoing and you haven't received any money or a credit then this is a mute point tax wise and in the hearing you should ask how much they plan on paying you or tell them to go pound salt. There is no earnings here if the case is still ongoing. 

 

HP

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1099-C is for the forgiveness of debt. From what you posted they have won a judgement and are still attempting to collect it via post judgement proceedings. The two are diametrically opposed if this is for the very same debt. They have told the federal government that they have forgiven the debt. What amount of the judgement is still outstanding and what is the amount of the debt?

 

Making the assumption that the 1099-C covers all of the debt, if it were me I would file a motion to to quash the post judgement proceedings and rule that the judgement is settled in full. The lawyer will tell you "oh that was a mistake and you need to pull your motion". I would not. If you get to court and the judge seems to want to go along with the crap the lawyer is spouting then I would ask the judge to stay all further proceedings until OC properly corrects the issue via a corrected 1099-C and require OC to come back to court to prove they have corrected the situation. Make this as difficult as possible for them.

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If they got the judgement in 2009, and then made no further attempt to collect on it for 3 years...that's one of the "triggers" requiring them to issue the 1099c. 

 

However, it doesn't make the debt go away.  You still owe it.  And now, you get to pay taxes on it (unless you can prove insolvency (see IRS Pub 4681)).   And then, if they do collect on the judgement, you get to try to get your money back from the IRS.

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If they got the judgement in 2009, and then made no further attempt to collect on it for 3 years...that's one of the "triggers" requiring them to issue the 1099c. 

 

However, it doesn't make the debt go away.  You still owe it.  And now, you get to pay taxes on it (unless you can prove insolvency (see IRS Pub 4681)).   And then, if they do collect on the judgement, you get to try to get your money back from the IRS.

 

I know this has been discussed before but I do not agree. When a 1099-c is issued the debt is cancelled unless the issuing entity can later prove the 1099-c was issued in error. The plain language of the 1099-c instructions are abundantly clear on this:

 

 

 

 

A debt is deemed canceled on the date an identifiable event occurs or, if earlier, the date of the actual discharge if you choose to file Form 1099-C for the year of cancellation

 

 

In any event, Capital One is never required to issue a 1099-C simply because the non-payment testing period expires. They are not among the entities required to do so. In fact, rarely any of the entities we discuss here are among those entities required to issue a 1099-c at the end of the non-payment period.   I think once one thoroughly reads the 1099-C- instructions, the whole 1099-C is really pretty simple.

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Unfortuneatly, we're stuck in the "weasal words" loop.  Here's a quote from Pub 4681.

 

If you receive a Form 1099–C, that means an applicable entity has reported an identifiable event to the IRS regarding a debt you owe. The identifiable event may be an actual cancellation of the debt or it may be an event the applicable entity is required, solely for purposes of report-ing to the IRS, to treat as a cancellation of debt. For information on the reasons an applicable entity files Form 1099–C, see

Identifiable Event Codes, later.

 

In effect, the word "cancel" to the IRS does not mean the debt no longer exists.  It does mean you have "found income" upon which you get to pay taxes.

 

The best example of this is:  you're sued for a past due debt;  you show up in court;  you raise the SOL as an affirmative defense;  the judge agrees;  the creditor doesn't get a judgement.   BUT...using the SOL is one of the IRS triggers...you get a 1099c...but as far as the creditor is concerned, the debt still exists and they can continue to try to collect...they just can't use the courts to do it.

 

I think we need some actual TAX court case references to settle this.

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I think we need some actual TAX court case references to settle this.

 

Since tax court is a court of limited jurisdiction, created to resolve disputes between citizens and the IRS, I don't think you're going to find what you're looking for.

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I don't think the issue is with the IRS at all. It is with the debt collectors who think they can use the "threat" of 1099-C to coerce payment. I don't consider it much of a threat at all. In fact, it is my opinion that 1099-C can be a good thing.

 

Debt collectors are not among the list of entities "who must file" a 1099-C". Therefore, any 1099-C filed by a debt collector (or a non-bank lender) is done so voluntarily, creating the rebuttable presumption that they did so knowingly and with the intent to cancel the debt. Consistent with the case law I've posted previously on this issue, the burden then falls upon the debt collector to rebut the presumption that the 1099-C was issued in error. Otherwise, in my opinion, the debt remains cancelled and therefore uncollectible. That being the case, I would not hesitate to file against a debt collector who cancels the debt, then attempts to collect, or continues to report a balance due on a credit report, or who fails to issue a satisfaction of judgment.

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I agree that a CA or JDB who sends you a 1099c could be accused of filing false information with the IRS (as if the IRS would really care...pay them first, then prove it).

 

However, in this case, its the OC who sent the 1099c.  They are one of the enities required to do so whenever an IRS trigger event occurs,  As pub 4681 clearly states, "cancel" does not necessarily means the debt is extinquished.

 

I hope the OP comes back to us after his court hearing in June so we can follow this case.

 

As it stands right now, the OP has two choices:

1.  Study Pub 4681 to see if you qualify for insolvency.    If so, file the appropriate forms...if not, pay the  taxes.

2.  Ignore the 1099c and wait to be audited.  hopefullly you'll have a court decesion by then.

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Yes.  What other enities fit the definition?

 

If the credit card arm of Capital One, Capital One Financial Corp. is the "original creditor" and thus falls under #6 below, they are exempt from having to file upon the expiration of the non-payment testing period. Only entities 1 -4 "must file" upon expiration of non-payment testing period. Note that a debt buyer/debt collector does not fall within any of the definitions below1 and are therefore never required to issue a 1099-c. When they do so, it is always done voluntarily.

 

(1. I suspect student loan servicing companies fall within #2)

 

 

 

Who Must File
 
File Form 1099-C if you are:
 
1. A financial institution described in section 581 or 591(a) (such as 
a domestic bank, trust company, building and loan or savings and loan 
association).
 
2. A credit union.
 
3. Any of the following, its successor, or subunit of one of the 
following:
 
a. Federal Deposit Insurance Corporation,
b. Resolution Trust Corporation,
c. National Credit Union Administration,
d. Any other federal executive agency, including government 
corporations,
e. Any military department,
f. U.S. Postal Service, or
g. Postal Rate Commission.
 
4. A corporation that is a subsidiary of a financial institution or credit 
union, but only if, because of your affiliation, you are subject to 
supervision and examination by a federal or state regulatory agency.
 
5. A Federal Government agency including:
a. A department,
b. An agency,
c. A court or court administrative office, or
d. An instrumentality in the judicial or legislative branch of the 
government.
 
6. Any organization whose significant trade or business is the 
lending of money, such as a finance company or credit card company 
(whether or not affiliated with a financial institution). The lending of 
money is a significant trade or business if money is lent on a regular and 
continuing basis.

 

 

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Ah, maybe that's where we're confused. I'm saying this applies:

 


8.
The expiration of non-payment testing period. This applies only to entities described in numbers 1, 2, 3, or 4 under Who Must File, earlier. This event occurs when the creditor has not received a payment on the debt during the testing period. The testing period is a 36-month period ending on December 31, plus any time when the creditor was precluded from collection activity by a stay in bankruptcy or similar bar under state or local law. Enter “H” in Box 6 to report this identifiable event.
The creditor can rebut the occurrence of this identifiable event if:
a.
The creditor (or a third party collection agency on behalf of the creditor) has engaged in significant bona fide collection activity during the 12-month period ending on December 31, or
b.
Facts and circumstances that exist on January 31 following the end of the 36-month period indicate that the debt was not canceled.
Significant bona fide collection activity does not include nominal or ministerial collection action, such as an automated mailing. Facts and circumstances indicating that a debt was not canceled include the existence of a lien relating to the debt (up to the value of the security) or the sale or packaging for sale of the debt by the creditor.
Which my gibberish to english translator interprets to mean the "expiration of non-payment" testing period (36 months) applies as a trigger ONLY if the enitity failed to make a collection attempt during that time.

 

So, as I said, if Crap 1 got the judgement more than 3 yrs ago, but failed to attempt to collect on it, THAT's a trigger for the 1099c.  But, the debt is still not extinquished, so they're now going to court to collect.

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