loan being written off question

[globetrotter]

This question is for a friend of mine, and if anyone knows the answer it will help a lot. She has had a loan written off by a credit card company for about $10,000. She says that she no longer needs to pay this since it has been written off. Is that true or is she still liable to pay it? She has not declared bankruptcy.

[terry1156]

Re: loan being written off question

An interesting question. I did a little research and this is what I came up with.

Debt that is written off by credit card companies is done mostly for accounting purposes to make the books look right. It might sound like that gets her off the hook, but it doesn't. Your friend still owes the debt, even after the credit card company has written it off. They may not think they are going to get it, but they will still most likely try. That includes hiring everything from hiring a collection agency to wage garnishment.

[Tree0164]

Re: loan being written off question

Even if they write it off, she may be responsible for income taxes on it. They will probably be sending a 1099 misc income.

[Saving in So Cal]

The credit card company may have written off the debt because the statute of limitations for collecting on the debt has run in your friend's jurisdiction. As other posters have said, the fact that the bank may not be able to collect on the debt does not necessarily mean the bank cannot report the charge off to credit reporting agencies. Also, as other posters have said, your friend may very well have cancellation of debt income. If so, she must report it on her income tax return and pay taxes on it.