Posted on: 28th Feb, 2008 10:04 pm
HI,
I have a client that received a 1099c for this year for a debt that was forgiven as of May 2007, which his x-wife had assumed in the property settlement in 2005. She made no payments after they got divorced and the movable property was reposessed in May 2007. He called the loan company to tell them she had assumed the loan so that they could issue the 1099c in her name but informed since he was the principal person on the loan he could not be removed from the loan and the 1099c was his for the debt forgiveness. He now has received a corrected 1099c for 0. He called the loan company again and they said they decided not to forgive the debt after all and are going to continue the collection process. Can they do this? It has almost been written off a year according to the 1009C since May 2007. He only makes about 24,000 a year and the debt is for a repossed trailer he did not live in since before 2005. He will be insolvent in you include that debt because he owns nothing but a used truck he drives he does not even have a checking account and lives with his parents. I am only a CPA and they are asking for my advice because they are a friend and can not afford an attorney but I just don't know how to help them. If anyone has any advice I would really appreciate it.
I have a client that received a 1099c for this year for a debt that was forgiven as of May 2007, which his x-wife had assumed in the property settlement in 2005. She made no payments after they got divorced and the movable property was reposessed in May 2007. He called the loan company to tell them she had assumed the loan so that they could issue the 1099c in her name but informed since he was the principal person on the loan he could not be removed from the loan and the 1099c was his for the debt forgiveness. He now has received a corrected 1099c for 0. He called the loan company again and they said they decided not to forgive the debt after all and are going to continue the collection process. Can they do this? It has almost been written off a year according to the 1009C since May 2007. He only makes about 24,000 a year and the debt is for a repossed trailer he did not live in since before 2005. He will be insolvent in you include that debt because he owns nothing but a used truck he drives he does not even have a checking account and lives with his parents. I am only a CPA and they are asking for my advice because they are a friend and can not afford an attorney but I just don't know how to help them. If anyone has any advice I would really appreciate it.
Nothing doing now except consulting a mortgage attorney. He needs to negotiate with the loan company. The company shouldn't have sent the form again. Once a debt is canceled, it should not be collected again.
Hi Donielle,
The loan company should not have sent the 1099-c form again. Perhaps the company felt that the client should be paying for the unpaid debt. But when they've come to know that the ex-wife supposed to pay on behalf of the client will be repaying, they must have been a bit skeptical because she has actually made no payments. Moreover, since the ex-wife's name is not yet on the loan, therefore, the lender cannot force her to pay as much as they can do so with the client. That is the reason they must have changed their decision to forgive the debt.
As a borrower, your client needs to repay the debt to avoid further dispute with the loan company. If he can afford to take help of an attorney, it would have been great. otherwise he needs to pay it.
However, you can at least inform the client that he may not have to pay federal tax on unpaid debt if in any case he fails to repay and the lender stops from collecting it. On the state level, he may have to pay tax depending upon where he resides.
good luck and let me know if you have further questions.
The loan company should not have sent the 1099-c form again. Perhaps the company felt that the client should be paying for the unpaid debt. But when they've come to know that the ex-wife supposed to pay on behalf of the client will be repaying, they must have been a bit skeptical because she has actually made no payments. Moreover, since the ex-wife's name is not yet on the loan, therefore, the lender cannot force her to pay as much as they can do so with the client. That is the reason they must have changed their decision to forgive the debt.
As a borrower, your client needs to repay the debt to avoid further dispute with the loan company. If he can afford to take help of an attorney, it would have been great. otherwise he needs to pay it.
However, you can at least inform the client that he may not have to pay federal tax on unpaid debt if in any case he fails to repay and the lender stops from collecting it. On the state level, he may have to pay tax depending upon where he resides.
good luck and let me know if you have further questions.
you definately need to talk with a lawyer