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

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.

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Attorney answers 3


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 answering your question to solicit you as a client and there is a good chance that I am not licensed to practice law in the state that you reside. I hope that you find my assistance beneficial and, at most, use my advise as a finger pointing in the right direction. An attorney client relationship is not established by posting back and forth online. One of the most beneficial aspects of working with an attorney is the attorney client privilege which does not exist when you post personal facts online to faceless strangers. Hire an attorney if you want specific legal advise. If you cannot afford one, call your local bar association or search "(your city) legal aid" online. The fact that you took the time to post your question online likely means that you could use the aid of an attorney. Call around your area and see if any local attorneys offer free consultations.


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 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 information ("the answer") provided above is for general information and educational purposes only. The answer should not be taken as legal advice for any individual case or situation. Posting the question and reviewing the answer does not constitute an attorney-client relationship. My firm will ask you to sign a written contract prior to the commencement of representation in any attorney-client relationship. Please contact 770 427 5600 or 404 373 1970, if you wish to discuss your situation further. Skaar & Feagle, LLP accepts select consumer rights cases. These cases include, but are not limited to, cases of abusive and unlawful collection activity, debt defense, credit reporting of false or obsolete (old) information, high interest lenders (title pawns, payday loans), debt management plans, and fraud or unfair practices in the sale and financing of automobiles.


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.

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