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Sha
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Subject: 1099 and tax for credit card debt
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Wed Apr 29, 2009 10:51 pm
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I have $50000 debt on my credit cards.(Because I cant pay), during next 4 years(SOL In California) creditors will try to receive their money.They will call me and even maybe they sue me.Imagine that I don't have any job and any cash in my bank account and I don't have any property.Now my question is:
Do I have to pay tax? I mean what about after 4 years (SOL) ? Do I have to pay the tax of $50000 after 4 years? (If I do not pay even one cent to creditors?)
Your kind reply is very appreciated.
Sha |
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Mary
Joined: 06 Jul 2006
Mary's page
Posts: 730
17413 Magic Points
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Thu Apr 30, 2009 6:45 am
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Hi Sha
Yes, it is true that the creditors may sue you for the debt and bring judgment against you either to garnish your bank account or your wage to recover the debt. However, bringing judgment does not mean that the creditor has to recover the debt immediately. Judgment has its own Statute of Limitation and so they can start the process of wage garnishment within the SOL period.
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Where there's a will, there's a way !! |
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scott
Joined: 28 Jun 2006
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Posts: 462
10934 Magic Points
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Thu Apr 30, 2009 6:58 am
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If the creditor does not collect the debt within the SOL period, he loses his right to collect the debt legally and you are no longer responsible for the debt. So you need not pay tax on that amount. However, if the creditor tries to recover the debt and you come to a settlement plan in order to repay the debt for less (say 40% of the outstanding amount) and the rest 60% is waved off by the creditor, you need to pay tax on this 60%, if the creditor sends you a 1099 C form.
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SCOTT
Use your credit account responsibly and enjoy a debt free life. |
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fireyone
Joined: 26 Feb 2008
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Posts: 4124
1011 Magic Points
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Thu Apr 30, 2009 10:34 am
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| Sha, both Scott and MAry are correct and I have actually seen taxes having to be paid on this type of debt. My mother in law left a lot of credit cards and a mortgage go and ended up being hit with taxes on those items at the end of the year. I wish there was an easy answer for you. Times and the economy are rough and we all are finding it tough to pay are bills. Good luck. |
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Sha
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Subject: Tax on unpaid debt
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Fri May 01, 2009 9:25 pm
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| My question is: Should pay tax on my debt even if the creditors cant receive money from me? (during 4 yrs. of SOL) even if they cant garnish my wage or take money from my bank account?( Imagine I dont have a Job and I dont have even a penny at my bank account) |
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Mary
Joined: 06 Jul 2006
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Posts: 730
17413 Magic Points
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Mon May 04, 2009 9:55 am
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As far as I know, if the Statute of Limitation on the debt has expired, you need not make any payment towards the debt. However, if before the SOL expiry, the creditor has waived off the debt and send you 1099C form, and you have filled it up and deposited with the IRS, you need to pay tax on the amount that exceed $600. If you have tax debt outstanding, the IRS can garnish you wage anytime when you start earning.
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Where there's a will, there's a way !! |
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