It may be possible to get a negative tradeline reporting from your credit report after you receive an IRS Form 1099c. Many residents of Georgia have had debt forgiven and have received numouers 1099c from banks, credit union and credit card companies. Even after they receive them, the credit bureaus seem to still report these debts as open and unpaid. When banks and other lenders write off debt that they determine is uncollectible, they are required to issue an IRS Form 1099c to a consumer. The consumer is then required to report that money as debt forgiveness and report it on their tax return. A recent court case looked at this issue in a case where a consumer received a 1099c, reported the income and still had the balance reported on her Trans Union credit report. See Holliday v U.S. Ban,, National Assn, 2023 WL 2543433.
Recent court case allows the possibility of removing an item on your credit report for which you receive an IRS Form 1099c
In Holliday, the court noted that Ms. Holliday received a 1099c for over $22,000, and reported it on her tax return. However, she noticed that it still appeared on her Trans Union credit report from US Bank. She disputed the item with Trans Union which was the right move to preserve her rights under the Fair Credit Reporting Act. Trans Union notified US Bank of the dispute and together, these defendants retained the item on her credit report. She sued both US Bank and Trans Union for failing to investigate her dispute.
US Bank tried to get Ms. Holliday’s case dismissed stating that the reporting of the $22,000 item was accurate. If the reporting is accurate, then Ms. Holliday has no claim under the FCRA. Interestingly, the court said that a bank issuing a 1099C, by itself may not be enough to extinguish a debt. However, in this case, Ms. Holliday received a 1099c that showed in box 6 which states “identifiable event code” a letter G which stands for “Decision or policy to discontinue collection.” Moreover, she had called US Bank and spoke to someone who in fact told her that the Bank was no longer attempting to collect the balance. These facts led the court to hold that there is a question of whether US Bank truly discharged the debt. This was enough for the court deny the bank’s Motion to Dismiss. The court also denied Trans Union’s Motion to Dismiss because it did not respond to her dispute.
If you received a 1099c, what can you do to get the item removed from your credit reports?
While there is no guaranty that you can get it removed, here are somethings that you can do to increase your chances of getting a debt removed from your credit report for which you receive a form 1099c:
Be sure to report the cancelled debt on your tax return.
This will go a long way to prove that you accepted the consequences of debt cancellation and even paid the tax on it. A court may be convinced that since the bank gave up collecting on the debt and you paid tax on it, that the bank cannot be heard to complain that its still trying to collect a debt. There may be no debt to collect if you pay tax on it.
Keep a copy of the 1099c.
This may be your proof that the bank cancelled the debt, especially if it fill in the letter G in Box 6 which shows that the 1099c is the result of a decision by the bank to discontinue collection.
Call the bank and get confirmation that the bank no longer seeks to pursue you for the debt.
Like Ms. Holliday did in the above case, she was smart enough to call the bank and get confirmation. Just note that the bank takes notes on every contact it has with its customers. Your call will be logged into its notes and may go a long way to prove that the bank has given up trying to collect your debt.
The law in this area is still pretty unsettled. There have been a few cases that have gone the other way hold just because a bank issues a 1099c does not mean that it no longer has a right to collect a debt. However, the Holliday case seems to hold the door open to the possibility that a bank cannot report the debt as income to the consumer, seemingly write it off, have the consumer pay tax on the debt and still claim that its owed money. You have nothing to lose by taking these steps if you receive a 1099c.
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