After being unemployed for 9 months,- got a job at apercentage of my former pay, and started working on payment plan with creditors. The only people Idid and could not pay were. The of my credit card companies who refused to settle or agree to resonable payment plans based on what I could afford. Got in volved with a settlment company (Allegro, no less) which I am out of, and have called the comapnies to try and work something resonable out now. One is listening, others are still talking lawsuits as they did a year ago. My question is what is the rule for the 10999. Companies write off bad debt anyway, so why would they incur legal fees to pass on to the consumer, instead of making a clean break of the debt. Please note that I have had a wonderful experience with Citibank, who worked with me based on my income and – am about to complete a two year payment plan in March. No lawsuit, clean break.
(1) Explain the reality of the 1099C in terms of the credit card industry, and one is not issued for the full amount due at times.
(2) Advise for someone who is in risk of law suits, because the heafty downpayments that creditors are asking for in not affordable.
The 1099C is required to be submitted to the IRS when more than $600 of debt has been forgiven by a creditor. This is a tax issue, not a creditor issue. You may be required to pay your regular income tax rate on the amount of debt forgiven as if you earned the money. So if you default on debt due, or you settle your debt for less than is due, a 1099C will be issued and reported to the IRS. Additionally, a 1099C being issued does not absolve you of the forgiven debt. It is an accounting and tax function. Unless the creditor has specifically notified you that the money is forgiven and not due, they can come back at some point in the future and collect.
The only way to avoid lawsuits and break the tie to the debt is with bankruptcy, or by paying the debt as originally agreed or in full.
Your confusion here is understandable. You are looking at your situation logically. Creditors don’t do that. They look at consumers as a process. People behind get threats and sued. People who don’t meet certain arbitrary thresholds get sued. It does not cost the creditor any more to sue you than someone else. They dump consumers into a big bucket they pay for and those in the bucket get sued. There is no financial incentive not to sue.