Settled unsecured debt and incorrect values on 1099-C, which legal specialty would one consult?

Asked over 1 year ago - Dallas, TX

I'm about to settle some debts. I'm reading of nightmares in dealing with scavenger debt collectors. Once trick they appear to be pulling is not reporting principal correctly on 1099-C forms and attempting to shift their own taxable income onto the consumer.

For example: You owed $1000 in credit card balance. Scavenger tacked on years of fees and interest bringing the total to $2100. If you settle for $300 then you should own around $210 on $700 forgiven income. Some of them are instead reporting that $1800 was forgiven, which would make your tax liability around $540. All of this is probably illegal in consumer and/or tax law, but Junk Debt Buyers have shown little interest in complying with the law.

Attorney answers (3)

  1. Lu Ann Trevino

    Pro

    Contributor Level 18

    Answered . Are you sure you want to settle? You need to be aware that the act of settling will drop your credit scores for at least a year. You might consider suing the reporting creditor for reporting improperly inflated balances to the credit bureaus. You can call me for a free consultation to discuss this matter.

    This comment is given for educational purposes only. No attorney-client relationship exists between us.
  2. Jeffrey Scott Hyslip

    Pro

    Contributor Level 13

    Answered . I am not a tax attorney. But from what I understand is if you are insolvent then here is a form you can file with your taxes that make debt forgiveness not taxable as income. Insolvency isn't defined as bankruptcy it's defined as owing more than you have in assets (therefore almost all of us are "insolvent". Speak to a consumer protection attorney (cough cough). If I can't help you I know attorneys nationwide that will assist you at no out if pocket cost.

    I am an attorney licensed to practice law in Ohio and some Federal Courts throughout the United States. I am not... more
  3. Kris K. Skaar

    Contributor Level 14

    Answered . You need attorneys with expertise in consumer rights and taxation. I frequently refer clients to get a tax opinion when settling substantial debts. I suggest that you find a local consumer rights attorney at www.naca.net. That attorney can make a decision about whether you need to bring in tax counsel.

    Skaar & Feagle, LLP maintains offices in Marietta (770 427 5600) and Decatur (404 373 1970), Georgia. The... more

Can't find what you're looking for? Ask a Lawyer

Get free answers from experienced attorneys.

 

Ask now

25,424 answers this week

2,739 attorneys answering

Ask a Lawyer

Get answers from top-rated lawyers.

  • It's FREE
  • It's easy
  • It's anonymous

25,424 answers this week

2,739 attorneys answering