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Posted by Herb Smith on November 10, 2006, 5:29 pm
Please log in for more thread options jt@atlasmiami.com wrote:
> I co-signed on a credit card for a friend. The card was not
> in my name but I was a co-signor therefore personal
> guarantor in the event of default. My friend charged up
> $7285 and subsequently declared bankruptcy. The credit card
> company came after me for the balance. They made me an offer
> to pay $5000 to release me from liability of the debt. I
> paid the $5000 and the reference was removed from my credit
> report. I received a 1099-C showing a forgiven debt in the
> amount of $2285 which was the difference between what I paid
> and the amount my friend sitll owed. Do I declare the $7285
> as a bad debt? Do I have to report the $2285 (the amount on
> the 1099-C) as income? What do I do in this case?
Unless you (like your friend) were also insolvent, the $2285
on the 1099-C is additional income to you. Some friend, eh?
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