Let’s Ask ESSER: I was able to negotiate a payoff with one of my creditors. Why did I get a 1099 from them?

Q:

I was able to negotiate a payoff with one of my creditors. Why did I get a 1099 from them?
Perplexed in Pewaukee

A:

Since 1982, multi award winning attorney Todd C. Esser has been leading the field, serving the community, and helping consumers just like you achieve success through trying financial times.Proceeding under the bankruptcy code to discharge debts while keeping homes and cars and providing a fresh start. Constitutionally protected bankruptcy laws were created to safeguard consumers.

Dear Perplexed:

When you were successful in negotiating a smaller payoff from your creditor you, in essence, created a revenue stream for yourself. The forgiven debt is therefore considered income, and should be listed under the “other income” section on your tax return.
However, if the debt had been discharged in a bankruptcy it would not be a taxable event.

Disclaimer & disclosure: I’m not an accountant, this comes from my personal legal experience only. Please seek the help of qualified Accountant to help you with your personal situation of if you ahve any further tax related questions

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