Question What if the bank just gives up?

[dealingsdone]

If the bank just gives up and writes your debt off as a total loss, do you still get hit with some sort of tax consequence?

[OhioFiler]

No, they won't write it off. They'll sell it to someone else who will come after you.

[keepmine]

They do have to charge it off. FDIC reg 5000 requires open accounts like credit cards to be charged off within 180 days of default. Just because it's chargedoff does not mean they can't still try and collect it themselves or sell or assign it to a 3rd party collector.
As to tax consequences. You'll get a 1099C if the amount written off is $600 or more. If you're insolvent or file bk, then no tax liability. Go to the IRS site and enter form 982 in the search function for detailed info.

[dealingsdone]

They do have to charge it off. FDIC reg 5000 requires open accounts like credit cards to be charged off within 180 days of default. Just because it's chargedoff does not mean they can't still try and collect it themselves or sell or assign it to a 3rd party collector.
As to tax consequences. You'll get a 1099C if the amount written off is $600 or more. If you're insolvent or file bk, then no tax liability. Go to the IRS site and enter form 982 in the search function for detailed info.

Great info...So what COULD happen is after the debt is charged off, another company might chase me for the money AND I get slammed by the IRS for the tax consequences. IS this correct?

Thanks,

[HHM]

Basically, yes.