To start I guess I need to say about 12 years ago my husband returned a vehicle that he had purchased about 6 months earlier. He purchased a Suzuki Vitara and we had nothing but trouble with it for the whole time we had it. It stayed at the dealership over half the time. We complained and complained and everyone told us we were stuck with it until we could trade it. Since back then we really didn't know any better we just took it to the bank and told them we were just going to have to default on the loan.
Well to make a long story short, they repossessed it and sent us the balance. Needless to say we did not have almost $8000 to give for something we don't even have. After a few months the bank put a judgement on my husband to try to collect the money. Depending on the state you live in there are different laws on how a bank can collect on a judgement. In our state, North Carolina the bank can not collect if you do not have it basically. So for the past 10 years we have had this hanging over us. Honestly if I had it I would pay it just to get rid of it. We have a special needs child and I feel he is much more important than paying for something that was a lemon to begin with and should not have even been sold to us.
Ok well that is the basics of what caused us to get a letter saying it was a Form 1099-C and we had to report it to the IRS because they also sent a copy of the letter to the IRS. Let me explain what a 1099-C is exactly before I explain why this was a fake. A 1099-C or Cancellation of Debt is a form sent once a collector has decided to forgive a debt you owe. You have to basically pay taxes on the forgiven amount as if it were income because in the eyes of the IRS that money is income even though it is not physical money. You can find out more about what a 1099-C is by watching the YouTube Video on this post.
First sign that I thought this was not a TRUE Cancellation of Debt- It was a LETTER not a form and second the amount on the letter did not match the amount on the judgement (I later read that the amount should actually be less than the original debt) , third thing was the date on the letter stating the cancellation event was in July but in November we got a letter trying to collect on the judgement. After calling my lawyer and talking to him I decided to call the number on the letter to find out if the debt was actually cancelled or forgiven, since we had not received anything else stating this I wanted them to send me something before I go and claim it has income.
The first person I talk to acted like they didn't know what I was talking about so he sent me to another person. This person goes on to tell me that this letter was just something they do to inform the IRS of a debt owed and that the word "cancellation" was deceiving because it is not a forgiveness of a debt. (I can argue with that since on the back of the letter it plainly states it IS a forgiveness of a debt, but I didn't feel arguing would get me anything). He said you know this debt is owed so why would we forgive it. He went on saying that the debt was still owed and the judgement had been renewed for 10 more years back in January 2012. I knew this since I had gotten something from the courthouse (it was also the fourth reason I thought it was a fake). This person went on to ask me why we have not paid and if we could agree on a amount so we could pay off this debt.
After all is said and done I figured out this was just a trick to get in touch with us or scare us into paying the debt. I guess they think people are scared of dealing with the IRS and would prefer to just pay. I don't know what they were thinking by sending this because IF we had put it on our taxes then I would expect they would be in trouble for lying and screwing up my taxes.
I hope this post will in some way help others if they ever get a Cancellation of Debt from a collector. If you have any doubt about it call someone.
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