I Got a 1099-C on an 8-Year Old Debt And I Think It’s Wrong


Dear Steve,

I have an old creditor (Bank of America Credit Card) who sent me a 1099C, and they said that they decided not to pursue a financial claim on just over $3,400 of old credit card debt.

The debt was charged off in 2012 but only closed out on the 1099C dated 12/15/20. Basically 8 years after it was discharged.

The account was opened on 09/26/2008 and discharged on 07/31/2012. I called Bank of America and got that information. I have had zero communication about this debt.

Do I call the IRS and ask for them to 4598 to get Bank of America to vacate the debt? or what is Plan B?



Dear Julian,

This is a very complicated issue that has many twists and turns.

There is a difference between ceasing collections and issuing a 1099-C. One is a business decision, and the other is a tax reporting requirement. They are not the same thing or necessarily triggered by the same event.

It’s not clear to me that when you say discharged, if you actually mean it was included in a bankruptcy filing and discharged.

If not, then the creditor ceased collections or reported it as charged-off or bad debt. That alone would not necessarily trigger a 1099-C.

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We will have to turn to the IRS for a description of when exactly a 1099-C is issued.

When To File
File Form 1099-C in the year following the calendar year in which the identifiable event occurs. See Exceptions, later. If you cancel a debt before an identifiable event occurs, you may choose to file Form 1099-C for the year of cancellation. No further reporting is required even if a later identifiable event occurs with respect to an amount previously reported. Also, you are not required to file an additional or corrected Form 1099-C if you receive payment on a prior year debt.

When Is a Debt Canceled
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. An identifiable event is one of the following.

  1. A discharge in bankruptcy under title 11 of the U.S. Code. For information on certain discharges in bankruptcy not required to be reported, see Exceptions,later. Enter “A” in box 6 to report this identifiable event.
  2. A cancellation or extinguishment making the debt unenforceable in a receivership, foreclosure, or similar federal nonbankruptcy or state court proceeding. Enter “B” in box 6 to report this identifiable event.
  3. A cancellation or extinguishment when the statute of limitations for collecting the debt expires, or when the statutory period for filing a claim or beginning a deficiency judgment proceeding expires. Expiration of the statute of limitations is an identifiable event only when a debtor’s affirmative statute of limitations defense is upheld in a final judgment or decision of a court and the appeal period has expired. Enter “C” in box 6 to report this identifiable event.
  4. A cancellation or extinguishment when the creditor elects foreclosure remedies that by law extinguish or bar the creditor’s right to collect the debt. This event applies to a mortgage lender or holder who is barred by local law from pursuing debt collection after a “power of sale” in the mortgage or deed of trust is exercised. Enter “D” in box 6 to report this identifiable event.
  5. A cancellation or extinguishment making the debt unenforceable under a probate or similar proceeding. Enter “E” in box 6 to report this identifiable event.
  6. A discharge of indebtedness under an agreement between the creditor and the debtor to cancel the debt at less than full consideration (for example, short sales). Enter “F” in box 6 to report this identifiable event.
  7. A discharge of indebtedness because of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt. A creditor’s defined policy can be in writing or an established business practice of the creditor. A creditor’s established practice to stop collection activity and abandon a debt when a particular nonpayment period expires is a defined policy. Enter “G” in box 6 to report this identifiable event.
    Other actual discharge before identifiable event. Enter “H” in box 6 if there is an other actual discharge before one of the identifiable events listed above. – Source
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So before anyone leaps to any conclusion, there are some possible explanations on why the 1099-C was delayed. For example, while Bank of America might have had to legally report the debt as charged off to comply with banking regulations, did they hold the debt in hopes of collecting on it, which they could have done.

Unfortunately, dealing with what might be an errant 1099-C is a total pain in the ass. I suggest you read this post for instructions on what to do.

Getting the IRS to open up a Form 4598 will be the best way to ask for their help in determining if the 1099-C was really in error.

Damon Day - Pro Debt Coach

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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.
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