Credit Card From Long Ago

daveleonard

LoanSafe Member
#1
Hello, I need some advice!

I have been in the Philippines since 2003. Before I left the States I paid all my balances and came to the Philippines. I had one credit card but paid that off.

In 2014 I was doing research on places to rent because I planned to return to the States to get a divorce from my Philippine wife. I took advantage of a free credit search just to see what it said. I found that there was a credit report of an unpaid balance on my account which had been reported to the credit bureau. I called the credit card company and the lady said that my account had been closed in 2006 for none payment and the balance was written off.

I did not know of any charges other than what I paid off. I immediately sent a letter to the card company and told them it was an honest error and that I would pay the balance just send me the paper work. I never heard back from them. I was never sent a notice of the cancel debt from any source.

They re-opened that suspended and written off account, charged me interest for the last ten years and wrote it off on their 2014 income tax which of course showed up on my IRS account as a cancel debt which I must figure as income on my 2014 tax return.
This is a big crisis for me because I live on my social security benefit and a small $320 pension. The card company charged interest on that $800 balance and it turned into $24,041 that they took off their tax and advised IRS and I got the cancel debt.

When I wrote the letter to them in 2014 they had my address yet I never received a notice of this action and did not find out about it until my 1040 was sent back by the IRS and the cancel debt revealed.

I earn approx $15,000 on social security, and $320 in a small pension. I have no job here in the Philippines, investments, business or any other income.

This means my income goes from about $18,000 paying no taxes to $49,000 and owing the IRS about $12,000. It will take me likely the rest of my natural life to pay this off, that is if they let me make payments on it. I am 70 years old now.

Is this right for a credit card company to do? It seems to me if they absorbed the $800 in 2005 that they would have had to take the $800 off their taxes as a loss in that year and not re-open the case ten years later or so adding interest to their advantage and taking off $24,000 in 2014 on their taxes.

Any advice? Thanks, Dave
 
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Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
#2
Hello Dave!

The statute of limitations has expired. I do not see how they can reopen the account.

What did you write to them in the letter and why did you write them?

Also, it looks like you are insolvent which means you only make enough money to cover your basic living expenses. Hence, they cannot collect anyways and you can just ignore them.
 

daveleonard

LoanSafe Member
#3
Thanks Maurice for the reply.
It is not the credit card company I worry about, it is the IRS. They will demand I count that cancel debt as income and I will go from paying no taxes to paying about $12,000. I may end up going the tax advocate route once I get the final verdict from the IRS.
I was just wondering if the IRS ever discounted a cancel debt under such circumstances.
I wrote the letter to the credit card company when I saw the credit report, just trying to do the right thing.
Thanks so much.
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
#4
You are welcome Dave.

OK, I understand and do not blame you. I still think they cannot write the debt off after the statute of limitations has expired.

If things for some reason do not work out and the IRS says you owe the debt, even with the IRS you can be considered insolvent and not have to pay the debt. Please see the info below.

A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. The forgiven debt may be excluded as income under the "insolvency" exclusion. Normally, a taxpayer is not required to include forgiven debts in income to the extent that the taxpayer is insolvent.

https://www.irs.gov/uac/What-if-I-am-insolvent?
 

daveleonard

LoanSafe Member
#5
Thanks again so much for the information and the web address. I will keep that and may need it after I hear from the IRS. It takes about two to three weeks to get a letter from the States so it may be a while factoring in the research and handling time.
take care, Dave
 

Moe Bedard

Call 1-800-779-4547
Staff member
Loan Safe Mortgage
#6
You are very welcome Dave!

Try to not worry about this debt. I sincerely think everything will be just fine.

I wish you the best of luck with all this and please let us know how everything turns out.

You take care as well.