The IRS requires creditors to mail a form 1099-C to a consumer when debt is settled, discharged, or is no longer collectable. And the Fair Credit Reporting Act and Fair Debt Collection Practices Act prohibit creditors from reporting and collecting debt that has been settled, discharged, or is no longer collectable. It stands to reason, therefore, that creditors may not make credit reports or collect debt after that debt is reported on a form 1099-C.
Yet such reporting and collection efforts continue to happen. And a Kentucky federal court has ruled that such conduct is prohibited. In Baker v. American Financial Services, Case No. 3:16-CV-00065-GNS, the Western District of Kentucky held that consumers may bring claims under the Fair Credit Reporting Act if creditors continue to report debts on credit reports after filing a Form 1099-C if the form provides that debt has been discharged.
If you receive a Form 1099-C for discharged debt, be sure to check your credit report within thirty days. If your creditor continues to report your discharged debt, call us to determine whether we can help you.