81–90 of 323 posts
A one-time forgiveness of debt is a generous gift to be received, but unless you have the habits to avoid debt again, it will just grow back again over time.
For the benefit of folks who might not understand how debt collection works, which may include OWS: if you buy $10,000 of an individual's debt for $500 and then forgive the debt, they have just incurred income of $10,000 and are obligated to pay taxes on it exactly as if you had handed them $10,000 in cash for services rendered. If you don't inform the IRS that you forgave the debt, via a 1099-C, you're going to get…
Couldn't OWS just hold it forever and not do anything with it? i.e. "Look I bought your debt, you don't have to pay me a penny for it ever, but I can't officially forgive you since to do so would subject you an income tax obligation. Just don't worry about it ever again and get on with your life."
Obviously, OWS is doing this as a political statement that the debt system in the US is corrupt, unjust or something. It does seem like things such as education shouldn't throw a kid into life-long debt from the get-go or the benefits should be more, uh, clear.
The student loan system today generates a huge number of defaults. The contradictory situation where the banks naturally write down this debt but work hard to keep the written-down out of the hands of the debtors may be an Achilles heal of the system.
We are not forgiving debts, we are abolishing them.
Earlier quoted context omitted.
I'm just thinking out loud here, but I would suspect that the IRS would only know that the debt was forgiven if the debt owner wrote the debt off as a loss on their taxes. If they simply hold it and do nothing, even if they deleted it from your credit record (which they can do), no taxable event would have occurred. I could be wrong in this crazy country of ours, but I believe there is no law requiring a debt owner t…
I'm not 100% sure, but I'd be completely shocked if the banks and credit card companies (or whoever) that sell the debt didn't have to report the sale to some government agency, or even the IRS itself, so the IRS could probably find out that way. And now that OWS has announced they're buying up debt and forgiving it, the IRS is going to have a pretty good idea what's going on...
Earlier quoted context omitted.
"Debt isn't some random accident like getting hit by a car while crossing the street." Except debt can be exactly due to some random accident like getting hit by a car while crossing the street and you don't have the insurance to pay for the medical bills. I'm not saying that this is true for all of the OWS debts: probably not even the majority. I'm just saying that it's not as easy as "it's your fault you're in debt…
This may sound harsh, but medical attention isn't free, and crossing that street without medical insurance and getting hit by a car and accepting expensive treatment you can't pay for is still incurring debt which you are obligated to pay back. This is why insurance of all forms exists; to protect us from expensive, catastrophic events. So as far as fault goes, you are very much to blame if you take risks and choose…
Earlier quoted context omitted.
I'm actually interested in knowing if I bought the debt of someone else, could I write whatever I wanted on their credit report? For example, could I purchase $15k worth of debt for $500 and then forgive the debt and report to the credit agency that it was paid in full?
You can't erase the statement that the debt was 180+ days late and sent to collections. The original debt holder could erase that statement, but they have absolutely no incentive to, since they took a 97% loss on your debt. A single late payment like that will probably drop your FICO score 150-200 points.
I walked away from my primary residence because it lost over $100K in value. My credit score only dropped from ~705 to 655 (per Creditkarma.com). Also, only one of my creditors lowered my credit limit (Citibank). American Express didn't even blink, and I've got a Platinum card with them with a $75K+ limit. To date, I've missed over 22 payments on my mortgage, and my credit score still remains fairly usable (I may complete a short sale, or may let it forclose. Depends on how amiable the noteholder is to both scenarios).
You've been lied to. The risks of walking away from most debt is highly overrated.
For the benefit of folks who might not understand how debt collection works, which may include OWS: if you buy $10,000 of an individual's debt for $500 and then forgive the debt, they have just incurred income of $10,000 and are obligated to pay taxes on it exactly as if you had handed them $10,000 in cash for services rendered. If you don't inform the IRS that you forgave the debt, via a 1099-C, you're going to get…
It could alternatively be characterized as a gift, in which case it is not income to the recipient (but could incur gift taxes to the "gifter").
If you don't inform the IRS that you forgave the debt, via a 1099-C, you're going to get wrist-slapped mightily if they think it is an honest mistake or, if you're, say, doing it as a political statement, you will be afforded the opportunity to make your political statement in front of a judge hearing your case for criminal tax evasion.
No. If it is treated as a gift--gifts under a certain size do not need to be declared. If it is not treated as a gift, only a creditor that is a financial institution is required to file a Form 1099-C. loan. 1099-C is only required for financial institutions or entities engaged in the business of lending money. http://www.irs.gov/pub/irs-pdf/i1099ac.pdf. Moreover, the IRS does exercise discretion over pursuing cases--as the OP has already indicated, they have provided their blessing to these transactions and it is unlikely that any negative tax consequences will accrue (especially in this political environment).
For the benefit of folks who might not understand how debt collection works, which may include OWS: if you buy $10,000 of an individual's debt for $500 and then forgive the debt, they have just incurred income of $10,000 and are obligated to pay taxes on it exactly as if you had handed them $10,000 in cash for services rendered. If you don't inform the IRS that you forgave the debt, via a 1099-C, you're going to get…
Hi everyone. I want to assure you all that we are aware of the tax implications. We are working with a pro-bono tax lawyer and have called the IRS several times. The IRS informed us that we do not meet the requirements to file a 1099-c (we are not a bank, credit union, etc.) Our tax lawyer has written some technical langue for our website. The bottom line is that we will be purchasing debt of people who are most like…
It would be cool if someone created something like prosper, where I could see bad debt from people, and they could make pitches for why I should extinguish theirs. For $x, I could purchase and extinguish N x $x in debt, where N is some function of type, time to maturity, etc. I personally would be more likely to buy deserving-seeming medical, failed business, etc. debt than car notes or whatever, but maybe others wou…
I actually cannot imagine how this would lead to better outsomes than just buying and forgiving debt blindly. You would preference the best and boldest liars over people who can't bring themselves to debase themselves in front of the world in hopes of your patronage.
Buying blind at least solves the adverse selection problem.