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When you do not pay your bills, the credit card company usually gets after you about it. Eventually they will get the collection agencies involved if you do not respond to their inquiries. After it is all said and done, you may file for bankruptcy, or you may be able to negotiate some other form of payment that both you and your credit card company can handle.

But if, in the long run, you just cannot pay your debt, your credit suffers. Along with some form of punishment or another, you are no longer obligated to pay the debt. Around this time is when you may receive a 1099-C form.

What Is a 1099-C Form?

So you may be standing next to your mailbox looking over this form in your hands, wondering what it is, and what your credit card company wants to squeeze out of you this time. What does it mean when a creditor sends you a 1099-C form anyway? A 1099-C form is a form that basically states formally that your debt is forgiven.

What?

If you have owed money on your credit card, have resorted to the fact that you will never be able to pay it back, and go bankrupt or choose a similar escape, the credit card company will write your debt off. This means that the legally relieve you of that debt that you owe to them on your credit card. This 1099-C form is the legal document that states this to be true, giving you and they proof of the debt forgiveness.

What About the Money?

When you receive such a form, your debt, as we have established, is forgiven. However, because you bought things with this money and did not pay it back, you must count it as income. When you fill out your tax forms, you must include the amount of money that was part of your forgiven debt as income, because really, that’s what it is… free money to you.

Of course there are the prices you have to pay, so that in all actuality it is not free. Your credit reputation is damaged for a very long time, and any chances of you getting a mortgage or a large loan are very slim. You can, however, with credit cards and other forms of credit, build your credit back up to a descent number now so that when that penalty is removed from your credit report, you will have perhaps even better credit than you did before.

Paid in Full

If you end up settling your debt for a lower price than what you originally owed, the credit card company will accept less and still record that you “paid in full”. When this occurs, make sure that they do not report the remaining amount of debt to the IRS making you count it as income. If they report that you have paid in full when the debt paid was a smaller amount that the original, you still do not have to count that as income on your taxes, because they have accepted that as full payment rather than partial.

Filing for bankruptcy is already going to do you enough damage as it is. You do not want to have it be any more difficult with your savings and checking accounts once you go bankrupt. So does filing for bankruptcy really affect your savings and checking accounts, and how?

Going bankrupt affects not only your credit report and your ability to get credit in the future, but your bank accounts as well. However, it usually only affects them if it is the bank or credit union that you are with that you owe money to. If this is the case, you may very well lose control of the money in these accounts if you file for bankruptcy. You should consider guaranteed online personal loans.

If you owe money to a credit card company, they may very likely freeze your account. However, this is not to be mistaken with what banks can do when you owe money to them. If you have not paid money to your credit card account, they will not only freeze or prohibit you from charging from that account, they may very well get the authorization to freeze your bank accounts as well.

However, if you took out a loan with your bank or credit union, you end up not being able to make the payments, and you resort to bankruptcy, the bank or credit union has full access to your checking and savings accounts. They are legally able to freeze the money in those accounts and remove you as a member from that particular credit union or bank. They do this because they do not want to deal with people who cannot make payments on their loans, or in other words people who have the potential to file bankruptcy again, and because you filed for bankruptcy, you cost them money, therefore they basically will not do business with you anymore.

Banks and credit unions that you put out by filing for bankruptcy freeze your accounts that have money to get all the money they can from you before they come up short. The least amount you owe them in the end, the better for them. They want to make up for the money that you would have paid them if you had not taken out bankruptcy, therefore they have the right to freeze the money in your account, leaving you with no access or control.

To freeze a bank account does not mean that your money just vanishes. It literally means that your bank account freezes, or ceases to be accessable. If the bank freezes your personal accounts, you cannot withdraw money from that account any longer. If you have a problem and would like to get your account settled, you should contact the lawyer who was in charge, or who conducted the freezing so that you can make some kind of negotiation.

People talk about credit cards, credit limits, credit history, credit scores, and credit reports all of the time. But what do all of these terms mean? Who decides what your credit score is and what is on your credit report anyway?

People may understand what their credit scores are, and what comes up on their credit report, but perhaps they do not understand who puts it all there. Of course YOU are responsible mainly for what score you get and what goes on your credit report based on your credit history, but who takes all that information, puts it into an equation, evaluates it, and scores it?

The people who are responsible for calculating your credit score and updating your credit report are part of what is called a credit bureau. These are also called credit reporting agencies. But still, who are these credit agencies, what all do they do, and how does that affect you and your ability to buy on credit?

Credit Bureaus

The three main credit bureaus are Experian, Equifax, and TransUnion. They are the primary sources that provide a person’s credit report. They are who you go to when you want to get a copy of your credit report, and they are who you talk to when you have an argument concerning possible errors on that report. They also calculate your credit score, and all of this is based on your credit history, or the management skills you have developed or lacked within the time you have held a credit account.

You’re Being Reported

Whenever you do business using credit, the lender you got the credit or loan from, like a bank, credit card company, or department store, is connected to the credit bureaus. They report, to the credit reporting agencies, your practices concerning your credit card or loan payments, how far in debt you are, how close to the limit you are, and how much extra you may be paying on your bills each month. They report anything and everything that you do, whether good or bad, that will portray how well you can handle credit.

Three for Free

Credit reporting agencies allow you to access your credit report once a year for free. This means that you can get a report from all three of the major bureaus for free once a year, therefore allowing you a total of three free credit reports per year. This is a more recently added right given to credit holders, and has only been in effect nationwide for a few years.

It’s easier to understand your credit scores and your credit report once you understand who organizes them. It is also helpful to know where to go if you have a problem with either of these. Do not be afraid to take any problems you have to these credit reporting agencies, because since they have so many people and reports to worry about, they cannot fix your problems without you helping them to recognize those problems.