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I’ve Been Settling My Debt and I’m Worried I Might Get a 1099-C

Written by Steve Rhode


Dear Steve,

In 2013 I bought a house, which was wonderful but financially straining. I was living a very frugal life and getting by ok. In 2016, however, a situation happened at work where I ended up working extensive overtime hours for months at a time (without extra pay because I am salary) and it took a toll on my physical and mental health.

This led to a downward spiral of living less frugally and creating a “head in the sand” situation for me since my only focus was on catching up with my work.

During this time, I fell behind on pretty much all of my unsecured debt and was unable to catch up before things went to collections since the minimum amount owed kept growing each month that I missed a payment.

I’ve been on payment plans with the collectors and am now in a position to start settling accounts one by one, but I wasn’t sure how this would affect my taxes.

I have settled debts with three different collectors this year to close out some of my debts and move on with my life. The amount I “saved” for each debt was under $600 but the total amount is over $600. Will I receive a 1099-C?




Dear Elizabeth,

The trigger for a 1099-C is not the cumulative amount of debt forgiven but how much per creditor.

I’d love to know how much each of these debts was before you settled them and saved less than $600 per creditor.

Can you please give me some feedback in the comments below?

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READ  So Who Has to Deal With This 1099?

About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.


  • Thanks Steve!

    The first one I settled was with FMA Alliance (originally Lending Club). I started with a balance of $2,717.36, made monthly payments until it was down to $792.62, then settled for $452.92.

    The second one was with National Credit Adjusters (originally Rise).I started with a balance of $2,074.09, made monthly payments until it was $488.09, then settled for $366.06.

    And then just recently I settled with Midland Credit (originally Credit One). I started with a balance of $813.04, made monthly payments until it was $500, then settled for $400.

    I’ve had opportunities to settle for more, but have never had a lump sum large enough to take advantage of it.

    Thanks again, and I’m glad to see you have a new podcast out!

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