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Why is My Ex-Husband Not Responsible for This 1099-C From the Repossession?

“Dear Steve,

Divorced single mom of three. The IRS held my last years refund of $9000.00. I finally asked them why and they said I failed to file a 1099-C from a 2006 repossesion and the vehicle was awarded to my ex in the divorce. The amount on the 1099-c is 10,300.00. I can’t afford to amend the return and attach a check or money order for the tax, penalty and interest due!! I am already working two jobs.

Why is he not liable for this 1099-C and what can I do??

Can they take that out of my money they already own me as a refund?? Is there any way to approach them to get this changed, it is even in my divorce papers that I am not liable for the financial responsibility for this car.”

The first question would be if this vehicle was financed in just your name or jointly. If it was financed in just your name but the divorce agreement between the two of you gave him the car, you were still responsible for the loan and that would be why you would get a 1099-C.

A common misperception when people get divorced is that the divorce agreement specifies who is responsible for what financial obligations. But that’s an agreement between the two parties and has no bearing on the creditor. If you were responsible for the loan and the divorce agreement said he was to pay it, you would still be responsible if he defaulted. You would have to go after him for payment.

hiding-1All is not lost however. It sounds like your liabilities might exceed your assets and if that is the case you can have the tax due, waived.

Read IRS Form 982 is Your Friend if You Got a 1099-C and find out how you can possibly be exempt from tax on the forgiven debt.

Since this was an old issue you will need to file an amended return of the year the 1099-C was issued to try and correct this situation. I would strongly advise you to work with a local tax professional if you have any questions or concerns about how to do this.

Please post your responses and follow-up messages to me on this in the comments section below.

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About Steve Rhode

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.

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