8 ms·

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

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 likely insolvent and if you are insolvent there is no tax implications. Period. Even if they are not insolvent the chain of events that would have to take place to result in this counting as taxable income is highly unlikely. It's not impossible, but it's very very very (lots more verys) unlikely. The long answer is much longer and more technical but rest assured, we are aware of the tax implications and it's not a problem.

philwelch 14y ago
If these people are insolvent, why can't they just declare bankruptcy?
- RyJones 14y ago
  it's expensive and means-tested. You don't get to keep everything, even if everything doesn't amount to much.
  - eupharis 14y ago
    Expensive in this case (for the US) meaning $700 to $2000. Which is rather a lot for the insolvent. Not to mention the paperwork sounds like an ordeal. I think there is a psychological block for a lot of people too. It takes a certain point-of-view and education to be able to enter into lending arrangements with creditors with the perspective: "I believe I am going to make a profit and we will both win. But there is a chance I will not be able to. The lender is self-consciously taking a risk, which they are being compensated for via interest (same basic principle with an investor). If things go badly and I need to declare bankruptcy, then well, yes, it sucks. But I have done nothing morally wrong." Fun fact: Henry Ford, Abraham Lincoln, and Walt Disney declared bankruptcy.
    - lifeguard 14y ago
      Donald trump has -- TWICE!
    - philwelch 14y ago
      Part of interest compensates the lender for risk, but the rest of it--most of it, in fact, if you have good credit--is just time value of money.
      - eupharis 14y ago
        Interest compensation for risk is distributed, granted. X percent of creditors will default on their loans. You don't know ahead of time who will and who won't. So demand Y percent from everyone over and above what you would in a world where everyone paid. If that's not what you are getting at, I don't get your comment? Unless we are talking of a foolish lender? Edit: Durr. Just got it. You are talking about the return the lender receives, the reason he lends instead of consumes. Yes, part of interest is risk compensation.
- logn 14y ago
  Bankruptcy ruins your credit. It disqualifies you from holding certain jobs (such as in a company requiring people handling cash to be bonded), not to mention that credit checks are part of background checks these days. Some debt is difficult to discharge in bankruptcy (student loans). It can hurt chances of getting security clearance. What the OP is offering seems to be a nice alternative.
  - lifeformed 14y ago
    Isn't this also bad for your credit? Well, I guess maybe it's just less bad than bankruptcy or not paying anything at all.
    - logn 14y ago
      I'm no expert in credit scores, but... If the original creditor already filed with the credit bureaus, that's definitely a negative on your credit. But I think the OWS can report that you "repaid" the debt which would be good. They could also bargain with the creditor to remove the negative report. Also, just reducing your balance of debt is good for credit. Plus, I don't think there's anything worse you can do for your score or future hopes of loans than declaring bankruptcy.
      - Millennium 14y ago
        IIRC, if your debt is being sold to a broker at pennies on the dollar -which is pretty much the only way OWS can get its hands on it- the bank has already long since given up on getting you to pay, and the credit bureaus have long since been informed. In other words, the damage to your credit is mostly already done; an actual bankruptcy would hurt worse, but you're still in for a world of pain.
        lifeguard 14y ago
        Wrong! A BK is a unique event from other delinquent accounts on one's credit report that carries extra weight. As do foreclosure and repo.
- lifeguard 14y ago
  Bankruptcy was 'reformed' while no one was paying attention and now some debt follows a person after a BK. Some people still have land line phones and don't know how to fire bill collectors. A BK also costs several hundreds of dollars now.
deleted 14y ago
[deleted]
forrestthewoods 14y ago
This sounds outrageously risky. Unless you have written, signed approval from the IRS for your plan I wouldn't dare make a move. Once you're in their sights it's damn near impossible to get away. In the current economic climate it doesn't take much to convince a jury you deserve to go to prison for tax evasion and/or fraud. A pro-bono lawyer can not stand against the legions of the IRS.
- lifeguard 14y ago
  Did you know the IRS has their own court and judges?
- ptracer54 14y ago
  The requirements of the 1099-c, Forgiveness of Debt is for any amount forgiven over $600. The argument for not filing a 1099-c for amounts over 600.00 is that one is not likely to know how much principle was forgiven. This is an important part of the code for the 1099-c. Believe it or not. Most Credit Issuers do not know the answer to that question. Lastly, how would the IRS know that a debt was forgiven? These transactions of buying debt are not reported to the IRS. I have been buying debt for 11 years and wrote a book on the subject.
wheelerwj 14y ago
hey, do you know if it is possible to buy up a specific person debt? or just general debt contracts?
- lifeguard 14y ago
  You could buy a specific corporation's debt but I think consumer bad debt is sold in big blocks of anon accounts until you are the owner.
  - rapind 14y ago
    Otherwise it'd be pretty interesting if you could buy your own debt at a huge discount.
    - sp332 14y ago
      This is sort of how collection agencies work, although the discounts here seems to be even steeper.
      - ptracer54 14y ago
        Most companies that own debt and those who collect for them will take a deep discount on a lot of the debt they purchase/collect. Individuals should be able to routinely settle debt for as low as 20 cents for every dollar they owe. This would be too expensive for Strike Debt to fund.
- tellulah 14y ago
  Yes, it is possible. I have purchased my daughter's debt from a hospital stay. This was 20 years ago but I called the creditor and told them that she was an unemployed college student and they weren't likely to get anything from her, I on the other hand was willing to pay them .20 on the dollar for the debt. They accepted and I paid the debt. (this was not the original creditor but I believe the third, the debt having been sold twice, so they likely made a little money on it and took what I offered rather than take the chance of getting less through another sale or nothing)

philwelch 14y ago

If these people are insolvent, why can't they just declare bankruptcy?

RyJones 14y ago
it's expensive and means-tested. You don't get to keep everything, even if everything doesn't amount to much.
- eupharis 14y ago
  Expensive in this case (for the US) meaning $700 to $2000. Which is rather a lot for the insolvent. Not to mention the paperwork sounds like an ordeal. I think there is a psychological block for a lot of people too. It takes a certain point-of-view and education to be able to enter into lending arrangements with creditors with the perspective: "I believe I am going to make a profit and we will both win. But there is a chance I will not be able to. The lender is self-consciously taking a risk, which they are being compensated for via interest (same basic principle with an investor). If things go badly and I need to declare bankruptcy, then well, yes, it sucks. But I have done nothing morally wrong." Fun fact: Henry Ford, Abraham Lincoln, and Walt Disney declared bankruptcy.
  - lifeguard 14y ago
    Donald trump has -- TWICE!
  - philwelch 14y ago
    Part of interest compensates the lender for risk, but the rest of it--most of it, in fact, if you have good credit--is just time value of money.
    - eupharis 14y ago
      Interest compensation for risk is distributed, granted. X percent of creditors will default on their loans. You don't know ahead of time who will and who won't. So demand Y percent from everyone over and above what you would in a world where everyone paid. If that's not what you are getting at, I don't get your comment? Unless we are talking of a foolish lender? Edit: Durr. Just got it. You are talking about the return the lender receives, the reason he lends instead of consumes. Yes, part of interest is risk compensation.
logn 14y ago
Bankruptcy ruins your credit. It disqualifies you from holding certain jobs (such as in a company requiring people handling cash to be bonded), not to mention that credit checks are part of background checks these days. Some debt is difficult to discharge in bankruptcy (student loans). It can hurt chances of getting security clearance. What the OP is offering seems to be a nice alternative.
- lifeformed 14y ago
  Isn't this also bad for your credit? Well, I guess maybe it's just less bad than bankruptcy or not paying anything at all.
  - logn 14y ago
    I'm no expert in credit scores, but... If the original creditor already filed with the credit bureaus, that's definitely a negative on your credit. But I think the OWS can report that you "repaid" the debt which would be good. They could also bargain with the creditor to remove the negative report. Also, just reducing your balance of debt is good for credit. Plus, I don't think there's anything worse you can do for your score or future hopes of loans than declaring bankruptcy.
    - Millennium 14y ago
      IIRC, if your debt is being sold to a broker at pennies on the dollar -which is pretty much the only way OWS can get its hands on it- the bank has already long since given up on getting you to pay, and the credit bureaus have long since been informed. In other words, the damage to your credit is mostly already done; an actual bankruptcy would hurt worse, but you're still in for a world of pain.
      - lifeguard 14y ago
        Wrong! A BK is a unique event from other delinquent accounts on one's credit report that carries extra weight. As do foreclosure and repo.
lifeguard 14y ago
Bankruptcy was 'reformed' while no one was paying attention and now some debt follows a person after a BK. Some people still have land line phones and don't know how to fire bill collectors. A BK also costs several hundreds of dollars now.

deleted 14y ago

[deleted]

forrestthewoods 14y ago

This sounds outrageously risky. Unless you have written, signed approval from the IRS for your plan I wouldn't dare make a move. Once you're in their sights it's damn near impossible to get away. In the current economic climate it doesn't take much to convince a jury you deserve to go to prison for tax evasion and/or fraud. A pro-bono lawyer can not stand against the legions of the IRS.

lifeguard 14y ago
Did you know the IRS has their own court and judges?
ptracer54 14y ago
The requirements of the 1099-c, Forgiveness of Debt is for any amount forgiven over $600. The argument for not filing a 1099-c for amounts over 600.00 is that one is not likely to know how much principle was forgiven. This is an important part of the code for the 1099-c. Believe it or not. Most Credit Issuers do not know the answer to that question. Lastly, how would the IRS know that a debt was forgiven? These transactions of buying debt are not reported to the IRS. I have been buying debt for 11 years and wrote a book on the subject.

wheelerwj 14y ago

hey, do you know if it is possible to buy up a specific person debt? or just general debt contracts?

lifeguard 14y ago
You could buy a specific corporation's debt but I think consumer bad debt is sold in big blocks of anon accounts until you are the owner.
- rapind 14y ago
  Otherwise it'd be pretty interesting if you could buy your own debt at a huge discount.
  - sp332 14y ago
    This is sort of how collection agencies work, although the discounts here seems to be even steeper.
    - ptracer54 14y ago
      Most companies that own debt and those who collect for them will take a deep discount on a lot of the debt they purchase/collect. Individuals should be able to routinely settle debt for as low as 20 cents for every dollar they owe. This would be too expensive for Strike Debt to fund.
tellulah 14y ago
Yes, it is possible. I have purchased my daughter's debt from a hospital stay. This was 20 years ago but I called the creditor and told them that she was an unemployed college student and they weren't likely to get anything from her, I on the other hand was willing to pay them .20 on the dollar for the debt. They accepted and I paid the debt. (this was not the original creditor but I believe the third, the debt having been sold twice, so they likely made a little money on it and took what I offered rather than take the chance of getting less through another sale or nothing)