Thread: Can a Debt Collection company continue to collect after a 1099c by original creditor?

I had a vehicle reposessed in 2002. I just found out last week that a collection company must have purchased the debt and sued me in 2004. I was never even aware this company even existed untill I recieved the garnishment of wages with my employer last week. So obviously I was never properly served, and because I was never invited to court they obviously won. And to top it off they won twice what the debt was originally for.

Now the kicker that I dont get. Yesterday I recieve a letter from the I.R.S. that I owe back taxes from 2006. The reason being is the original lender I borowed from filled a 1099-c cancellation of debt and forgiveness. I had to declare that as income in 2006 and owe for taxes of it. Plus penalties and interest with the I.R.S., which is fine and I understand. But wouldn't that mean that the collection agency would have to consider this debt as written off? How can they still continue to collect? I talked to the I.R.S. and they say that they can't... what do I do?

Find a pro bono lawyer. The original lender both sold your debt in 2004 *and* wrote the debt off their books in 2006. They can't do both.

If you can't get this straightened out, the IRS will allow you to amend the 2006 tax return to subtract out any of the debt you have actually paid...but only until 2010.