Should I Pay Off a Bank of America Debt After a 1099-C?

Question:

Dear Steve,

In 2011, I lost my job and could not pay on an unsecured credit card from Bank of America that was approximately $25,000.

Since then, I have been working, and last October refinanced my house to pay off other debt and do some major home repairs.

I also received some inheritance (about $30,000)

I also received a 1099-C from BofA for $19,481.

Doe this mean I am entirely discharged from the debt?

How does it affect my credit score?

Should I attempt to pay part of it now that I have some cash?

Mary

Answer:

Dear Mary,

It is always up to you to determine if you should pay on an old debt. But unfortunately, that is often an emotional issue and not a practical one.

I don’t know what state you live in, but it is likely the Statute of Limitations has expired on the debt, and even if they were to try and sue you even after issuing you a 1099-C, you should raise that as a defense.

However, I am not an attorney, and you should speak to an attorney licensed to practice law in your state regarding technical legal issues. One place to look for an attorney with experience in these consumer issues is to look here.

If you have not made a payment on the debt since you defaulted in 2011, then the B of A debt should no longer appear on your credit report. They should only be reported for a maximum of seven years and 180 days from when you last went into default.

So there should be no impact on your credit score over this old debt.

If you want to bring that old debt back to life, make a payment or pay it off for some unresolved emotional reason. Otherwise, it sounds like it is dead and behind you now.

It would be far better for you financially at this point if the debt has fallen off your credit report to put the money into your retirement fund.

Let me know what you decide to do by updating me in the comments.

Sincerely,

You are not alone. I’m here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don’t give up.

Damon Day - Pro Debt Coach