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Chase starts sending 1099C, but can they then sell to JDB and ...


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Gentlemen / Ladies,

 

I came across with these,...and I feel that I must share these with you all, and perhaps everyone can jump in and discuss about it...

 

Chase, one of the biggest bank, has started sending 1099C, in the letter, they provided codes:

 

Depending on the code entered, the OC may give up rights to collect the debt.

The reason codes are:

A—Bankruptcy;
B—Other judicial debt relief;
C—Statute of limitations or expiration of deficiency period;
D—Foreclosure election;
E—Debt relief from probate or similar proceeding;
F—By agreement;
G—Decision or policy to discontinue collection;
H—Expiration of nonpayment testing period; or
I—Other actual discharge before identifiable event
event.

 

Can anyone share some knowledge here then....

1) ....given they are going to issue the 1099 and stated they are no longer to attempt to collect, what are the chance these credit card debt be sold to JDB ?

2) ...If...& most likely,....the $amount they report to 3 credit rating agencies is different from the $amount they report on 1099, is this a violation of any FDCPA or FCRA rules ?

3)....If #1 question is a YES, then,...when the JDB takes legal action to us, can we simply pointing the fact that 1099 is issued by original creditor, thus, JDB should not be in any position to "lawsuit" us ??
 
 
The Internal Revenue Service does not view a Form 1099-C as an admission by the creditor that it has discharged the debt and can no longer pursue collection. Section 1.6050P-1(a) of the regulations provides that, solely for purposes of reporting cancellation of indebtedness, a discharge of indebtedness is deemed to occur when an identifiable event occurs whether or not an actual discharge of indebtedness has occurred on or before the date of the identifiable event.
 
Not ONLY the above codes troubles me, but, when taking a closer look at the article, Portfolio Recovery Associstes, a JDB, actually issued 1099C !!
 
Although there was a court ruling, as we all know, case-law only applicable at where the State.
 
So, it bakes the question: Suppose, CHASE issue 1099 to people, then sell it to JDB, and JDB not only takes legal action Vs. people, but also issue 2nd 1099 C, does that mean, we get double hit two 1099C, and as always double hit on credit reports.
 
Say we are lucky to follow all the steps have been discussed here at the forum, say we get the case dismissed or win the case. We then can try to remove the tradeline posted by JDB ( not OC), but how can we deal with 2nd 1099C ?
 
Also, it bakes another question: from the IRS codes, they always let entites report using cost basis, rather the face value, when it comes to tax deduction while often JDB pays pennies on dollar then filing lawsuit for the face value:
 
-when the JDB issue 1099C face value of the debt, is'nt that tax cheating?
-Or: if they issue 1099C cost basis (which reveals how much they pays), isn't it true, they can only filing lawsuit based on the cost , not the face value ??
 
Gentlemen/ Ladies...can anyone share with some idea? Thank you
 
 
 
 

 

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http://www.forbes.com/sites/peterjreilly/2012/06/09/tax-court-rules-1099-c-from-portfolio-recovery-associates-not-valid-for-year-issued/

 

the 2nd article, talks about Portfolio Recovery Associates clearly issued 1099C on the debt that way past SOL....can't believe they did that !!

 

People would have to fight at Tax Court ....OMG

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http://www.forbes.com/sites/peterjreilly/2012/06/09/tax-court-rules-1099-c-from-portfolio-recovery-associates-not-valid-for-year-issued/

 

the 2nd article, talks about Portfolio Recovery Associates clearly issued 1099C on the debt that way past SOL....can't believe they did that !!

 

People would have to fight at Tax Court ....OMG

 

Actually most consumers who disputed the illicit PRA 1099-c submissions when they first started this nonsense got them cancelled by the IRS without having to go to Tax Court.  The IRS rarely hauls a tax payer into court unless there has been a willful fraud or refusal to pay legitimate taxes owed.  This consumer likely landed in Tax Court for one of two reasons:  this was EARLY in the issuing of the 1099-c forms before the IRS was inundated with complaints about PRA or the relative high level of the alleged amount.  

 

It was actually a VERY simple dispute by the tax payer as there was no proof a debt was owed and PRA had no legal right to issue the 1099-c on forgiven debt until they proved they were legally entitled since they are buyers of debt portfolios NOT original creditors.  Also, if you are insolvent during the year that the debt is discharged there is a simple form to file with the IRS that cancels the tax out.  No Tax Court required.

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I too received a notice that in essence states that,

 

'We will no longer attempt to collect the unpaid debt on your account'.  

 

No where on the letter does it state that they have cancelled the debt (your CR will show whether it has been charged off or cancelled, but the CR can be changed at the discretion of the OC).  

 

My thinking is that now the OC can sell the debt and remove themselves from the mix and you will have to deal with the JDB's exclusively.  What I have found out through research is that the court/IRS has ruled that a 1099C can not be re-issued for the original amount.  If the JDB issues a new 1099C on their claim once they receive judgement against you then you will have to deal with a new round of IRS reporting.  Remaining insolvent and filing an accurate 982 will prevent any expense to you.  But, conversely a judgement is good for 10 years and can be renewed again and again.  The only thing is if the JDB gives up and resells your account then the validation process will start all over again.  You do have time on your side if no judgement has been rewarded.  

 

Dealing with a JDB is a dark hole that shouldn't be considered, if their mouth is moving then it's probably a lie.  if you decide and must get any agreements in writing, use CMRRR's whenever corresponding with JDB's.   Answer the summons and attend the court or arbitration. play the game and keep accurate records (including all incoming and outgoing correspondence).   JDB's like to take the path of least resistance and will pursue what is winnable and least costly.  The bottom line is ROI and time spent.  

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I have no experience with a 1099-C but it would appear to me that a 1099-C is the creditor informing the IRS that they have cancelled (not deferred) a debt: Form - http://www.irs.gov/pub/irs-pdf/f1099c.pdf & Instructions-  http://www.irs.gov/pub/irs-pdf/i1099ac.pdf and presumably the financial institution will likely be writing off that amount as a tax deduction.

 

If a financial institution sold a 1099-C/cancelled debt to a JDB I could see that being treated as taxable income for the OC and a possibly a write-off for the JDB when it turns out to be a worthless purchase.

 

For a JDB to file a 1099-C on any amount of the previously cancelled debt (even just the amount that the JDB paid the OC) would appear to me to increase the total amount of cancelled debt attributed to a debtor beyond the actual amount of debt. I would think that would potentially cause financial harm to the debtor by falsely increasing their potential tax liability beyond what they tax code would seem to allow. Only your competent CPA would know for sure. :-)

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I just got the same letter.   It would really be good if all of us that got this letter would find out what the rock solid 

bottom line truth is to this as we are all in the same boat.  Clarify, Varify, Doulble checked truth. 

 

Here is my understanding, is this correct:

 

 

1) it cannot be both charged off by the OC and sold.   and since they are filing a 1099, they have cancelled it? ( written it off of charged it off) 

 and can no longer come after me, or sue me or sell it,  even if it is not SOL

 it can be either "canceled" or "due".  It can only be one or the other.

    Correct? 

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Perhaps a better question to ask is whether the newly redesigned 1099-C, which requires the reporter to include a code for the event, will improve things. If the 1099-C explicitly says code G (policy decision), then the debtor may well have a case that the debt has not been truly canceled. I don’t know whether there have been any rulings on this situation in the past.

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Perhaps a better question to ask is whether the newly redesigned 1099-C, which requires the reporter to include a code for the event, will improve things. If the 1099-C explicitly says code G (policy decision), then the debtor may well have a case that the debt has not been truly canceled. I don’t know whether there have been any rulings on this situation in the past.

It is either cancelled or it is not cancelled IMHO. Lacking some ruling clarifying that the new code makes a difference in whether the debt was really cancelled or not really cancelled, I am not sure it is something that concerns me much even though a 1099-C or two are likely headed my way.

 

Charged-off is not the same as canceled debt.

 

Since a party can sue for almost any reason (including after the SOL has run) I need to be able to properly defend any lawsuit brought against me. I only see the debt cancellation issue aiding my ability to defend. I do not see how it would be detrimental to me should I get sued on the alleged debt after an OC filed a 1099-C. Maybe I am missing something but I don't know what it is.

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  1. found this.

     My "plain" reading of the event codes documented in the 2014 IRS 1099-C instructions, would leave me to believe that only code "H" would indicate that the debt may not have been discharged. Any other code is a discharge (cancellation/forgiveness) of the debt, according to those instructions.

    As a disclaimer, you should always consult a tax accountant and/or attorney with how to deal with any issues with reporting. I am neither a tax specialist nor tax attorney. Consider my ramblings just that... my personal thoughts on the topic.

     

    I am not an attorney. Any advice provided is not legal advice.
     
    clear.gifReply   clear.gifReply With Quote   multiquote_40b.png Blog this       
  2. Yesterday, 11:47 PM#10
    Registered UserB/F Newbie Join Date Jul 2012 State: Illinois  Posts 111
     

    interesting… here is some more info I found on this. 

    What can LEGALLY be reported probably depends on the CODE for field Box 6 on the 1099, the “Identifiable Event Code:”

    A Bankruptcy

    B Other judicial debt relief

    C Statute of limitations or expiration of deficiency period

    D Foreclosure election

    E Debt relief from probate or similar proceeding

    F By agreement

    G Decision or policy to discontinue collection

    H Expiration of nonpayment testing period

    I Other actual discharge before identifiable event

    A client just received a 1099 from Chase with code G:

    “G Decision or policy to discontinue collection”

    However, Chase still reports the full amount on the credit reports (along with totally bogus RECENT 120+ late payments) and we disputed. I argue that credit reporting IS an attempt to collect as the past due balance lowers your credit rating and it likely has to be PAID to get a mortgage.

    However, Code H clearly means that they can continue to collect.

    “H Expiration of nonpayment testing period”

    The creditor merely complied with the IRS rule.

    Summary

    1099s for canceled debts are a very complex subject and may result in consumer claims against creditors due to incorrect amounts, codes and credit reporting.

    MANY consumers will NOT be liable for any tax as they are INSOLVENT.

    Complete the IRS worksheet to determine whether you are insolvent: IRS-Insolvency-p4681-opt.pdf

    If you previously paid tax on a forgiven debt while you were insolvent, keep in mind that you may be able to AMEND your tax returns.

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Just like an attorney, "the meaning of cancelled depends". ;-) I think CR reporting is likely to be the biggest pain (assuming one is qualified for insolvency for 1099-C income) rather than risk of suit. Just my opinion.

 

Didn't Chase remove arbitration from their agreements back in early 2010? If so, their exposure to a class action would seem to be significantly heightened if they are abusive in CR reporting. Maybe they will behave and stay out of the news and courts. :-)

 

Some history on "Expiration of nonpayment testing period": http://www.aicpa.org/InterestAreas/Tax/NewsAndPublications/taxnews/Pages/20121113.aspx

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Gentlemen/ Ladies:

 

I agree with you all, yet what's going on out there now, is what really confusing...

 

1. JDB Portfolio Recovery Associstes, is doing it, (see the article on the top, so it is NOT a question "can they do that!?"...., the Question should be "What can we do about it?"....I mean if we receive 2nd or even 3rd 1099 from those JDB ...

 

2. Insolvent-- in IRS 's definition or in Court's definfition ?? Or does 'nt matter ?? --As long as bankruptcy was filed? Yet many of the people I believe are still in early stage, ie, fighting the lawsuit. If we all already filed bankruptcy or in the process of doing so, then would'nt it the easier way is to include "that debt and 1099 into bankruptcy "listing account/debt"?

 

How many of the people here will believe, a  BIG national scale of class action lawsuit among all States, will be filed VS. those JDBs who issus these kind of 1099 to people ?

 

And how many people believe also need to Federal / IRS need to step in to crack down these 1099 issued by JDBs....( the fact the it's tax deduction to JDBs FULL FACE VALUE, not the cost )....is'nt that violation of TAX codes or some sort...is that tax cheating?? ....I am very confused truly,....I hope some the attorneys here can jump in and share your understanding ??  

 

,

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Gentlemen/ Ladies:

 

I agree with you all, yet what's going on out there now, is what really confusing...

 

1. JDB Portfolio Recovery Associstes, is doing it, (see the article on the top, so it is NOT a question "can they do that!?"...., the Question should be "What can we do about it?"....I mean if we receive 2nd or even 3rd 1099 from those JDB ...

...

The linked story is 18 months old. The 1099-C at issue was for 2008.

 

It appears that the IRS has recently changed the 1099-C rules with their coding at a minimum. I would want to see something more recent with JDBs issuing 1099-Cs before I would get too excited about JDBs improperly filing 1099-Cs.

 

Like a frivolous or bogus lawsuit I would assume that a frivolous or bogus 1099-C could also be filed by almost any party at any time. Either way I would probably want to engage the opponent and tune them up on the law. YMMV

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One thing to keep in mind...these IRS rules relate to WHEN a 1099c should be issued.  For example, code C...which means the OC sued, the debtor raised SOL as an affirmative defense, the OC DID NOT get a judgement...therefore, the debtor has found TAXABLE income.

 

I'm fairly certain that only Code A...Bankruptcy...does not result in taxable income.  In certain cases, thanks to the mortgage forgiveness laws, maybe Code D.

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@TomnTex:

 

Then, like I mentioned, say, OC issued 1099, we got that, and becomes a taxable event to us, then, OC original creditor sells the credit card debt to JDB, the JDB also 2nd 1099....

 

Then,...what can we do to counter these ?? ( referring to the law suit and 1099  filed by JDB. ?? )

 

And since, from the article, since a JDB wa actually doing it. ...

 

Do anyone think it will sparks a class action lawsuit Vs. those JDB ??

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Interesting question. I have received 2 1099-c from chase as well. But from what i have been told is that once they cancel a debt they cant come after you for it. But i wouldn't count out a sleeze bag JDB try and go after it. And does anyone know how to get the cancelled debt off of the credit report?

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Here are what I see:

 

1. If OC issues 1099 and cancel/ write off the debt, no collection, legal action, no sell to JDBs, case close, .....it makes sense to me.

 

2. If OC issues 1099 say 2013, then they come after people say 2014 or 2015,.....it does NOT sense to me.

 

3. If OC issues 1099, then , sell the credit card debt to JDB,....JDB takes legal action AND issue 1099  Vs. people....the whole thing just CRAZY.

 

Another interesting situation, seems to me, CHASE already indicate, the amount $ on 1099 issued is NOT the same as they reports on 3 credit rating agencies.

 

Is'nt that a violation of FDCPA/ or FCRA or any kind ?

 

Can anyone share some info here:

 

Which OC, DO NOT do collection, simply issue 1099 ? ( Is Chase one of those NOW??)

 

Which OC, SELL their accounts to JDBs ?

 

I don't ask which OC do their collection/ take legal action,...I guess everybody know--American Express, Wells Fargo, Citi, Cap 1, BankAm, Chase ( was, not sure what they are up to)

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Chase got smacked by the government for their lending practices last year, so they're going the 1099c route...hard to predict where it will lead.  BUT...

 

The 1009c thing is an IRS regulation intended to make taxpayers pay taxes on "found income".  Unless you declared bankruptcy, it DOES NOT make the debt go away. 

 

The IRS is collecting taxes...not deciding who owes what to who.

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In scenio 3: -- If OC issues 1099, then , sell the credit card debt to JDB,....JDB takes legal action AND issue 1099 Vs. people....the whole thing just CRAZY....

 

On 1 hand, we deal with 1099 from OC. Yet at some point, JDB sue us, we present the 1099 from (OC) to Court, in way, that's a admission from us, isn't it?

 

"Look the defendant even present the 1099 from OC, indicating indeed defendant owe $."..... SO the general deniel is out the window, isn't it? 

 

You see that's what I am worry ! Yeah, according to IRS, the 1099 itself is NOT a indication that WE admits, but,...if we present it to court, that's admission, right ?

 

Or,...does that work the other way....it can proves to Judge that once WE deal with 1099 from OC, that's it !?? But again, then the whole thing does'nt make sense....OC issue 1099 then sells to JDB and JDB sue for for the FACE VALUE.

 

Consumer Attorneys,....what are you guys think ??

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Amtrust Bank v. Fossett, 224 P.3d 935, 223 Ariz. 438 (Ct. App. 2009)

 

held ".. that while issuance of a Form 1099-C may be prima facie evidence of cancellation of a debt, the lender may rebut that evidence by showing that when it issued the form it did not intend to forgive the obligation."

 

http://scholar.google.com/scholar_case?case=8963534240556124116&q=info:1AdmpObeZHwJ:scholar.google.com&hl=en&as_sdt=0&inst=569367360547434339&oi=scholarr

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Alright, thought I should chime in.

 

I had 2 alleged debts with chase.  One was SETTLED FOR LESS, and one was ignored.

 

I just received two 1099c from Chase.  One for the FORGIVEN amount on the settled alleged debt,  and one for the FULL amount on the ignored alleged debt.

 

I'm pretty sure they won't be selling these accounts, and apart from our CR, these debts will be done.

 

After chase and their time in court last year, it seems they are just reporting the losses and moving on.  Now, how to get these off the credit report :)

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