It's almost 1099 time

[Granny]

Hubby has an account with HSBC that has a balance of 10,000 and we haven't paid on it since May. They call daily and daily we ignore the calls. Today, they are calling once an hour, so I figure something is up.

I would like to delay the inevitable 1099 for another year, if at all possible so I have a chance to have him change his withholdings at work to cover the increase in income. Do you think that if we sent them a small payment it would delay them writing off the account until past the cut off time for 1099's for 2007?

[HHM]

Them writing off (charging off) the account is not going to generate a 1099.

A 1099 is only generating when the debt is "forgiven" meaning the company has voluntarily cancelled the contract such that debt is no longer legally collectible. A charge off is an accounting entry on the books of the creditor and then they sell the debt to the highest bidder.

[Granny]

So those poor folks that negotiate a settlement get a 1099 but if you simply quit paying, there's no tax consequences?

[HHM]

So those poor folks that negotiate a settlement get a 1099 but if you simply quit paying, there's no tax consequences?

Correct.

Of course, there are other consequences to simply not paying, but none are tax related.

[magyar123]

And a 1099 will only be issued if the settlement is $600 or over. If you have 6 credit cards, each with a balance of $1000, and you settle each by promising to pay $425 each, your settled amount with one will be $575 - no 1099 will be issued
With the 6 credit cards your settled amount comes out to $2550 - but neither of the 6 outfits will run a 1099.

[Granny]

This is one card, $10,000 balance and we have no intention of ever settling with any creditor. I'm in month 11 of a Ch 13, where in the world would I get any money to offer a settlement? By the time I finish my plan, the statue of limitations for collections will have run it's course. I live in Texas, everything we own is exempt. HSBC is SOL. The worst that could happen is that they issue a 1099, and from what HHM said, that won't happen.

God Bless Texas

[chpxiii]

Granny, from what I understand, Texas is a "debtor friendly" state.