Clearance renew possible with 1099-c?


I found this blog and want to say hello and ask a question if i can renew my clearance when i received a 1099-C statement from a credit card company.

I currently have a Secret level which is due for re-investigation in August 2019 and have 3 charged-off credit accounts. So far i was able to negotiate 2 accounts with the same company paid them off. however, I still have 1 account left with $14,000 and they said they have already issued 1099-C and not actively collecting the debt or come to settlement… but they will accept the full amount.
I have spent all moneys to pay off the other 2 accounts and will not have enough cash to pay off the full amount.

With my new company, i may be applying for TS/SCI level and wondering if i can renew without paying off that particular account or still need to pay off before the investigation starts…

Thanks in advance.

Did you report these issues to your current employer? The 1099-C’s aren’t a problem as long as you properly deal with them at tax time.

The third company already issued a 1099-C? If it was for the full amount, you don’t owe them anything. A 1099-C indicates that they have accepted a reduced payment (or no payment at all) and are no longer pursuing the debt. This is different from a “charge off” where they are no longer trying to collect but you still owe the money.

Be careful with your tax forms and the 1099-C forms. Even many tax preparers don’t know that you can exclude this imputed income so that you don’t get hit with a sizeable tax bill. You need to fill out a few extra forms (a financial statement basically) and if your debts outweigh your assets on the date that the debt was forgiven, the income is excluded.


Fascinating Ed. Good info for my hip pocket. For the OP…being absolved of the debt, still indicates you did not have a good repayment record with them. Be prepared to have the whole story of contact and interactions logged with emails, etc stating your efforts to get it resolved. Normally all debt must be in a repayment plan or addressed. With the 1099-C, as Ed stated, they no longer see this as money you owe. That doesn’t mean you acted in the best faith getting to that much debt…and therein lies the issue for clearances. Can you be trusted to make good decisions, follow the rules of society? If it is an overall simple story such as had two incomes, dropped to one, significantly less income, spouse had huge medical bills…house blew away in a hurricane, no insurance…it is does happen. But having three large debts unaddressed, two you settled…one they decided was overcome…you need explain why it was an aberration, if it was one. If you always lived that close to the edge, have a terrible repayment history…that also tells a story. Fixing finances just to get a clearance…doesn’t go over well.

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I remember hearing about this, a guy disclosed all his debts but forgot to include the discharged debt on his taxes so I think that caught up with him not just for the clearance but for the taxman. When they forgive debt like that it is considered income; I did not know that the way it is reported is via 1099-C. Hopefully I’ll never need to use that bit of info.

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Here’s hoping Squirrel. As Ed mentioned above though, and glad he did, apparently one can fill out a few more forms and dodge the tax on the written off money.

Thanks for your response and I have not report this to new employer yet though.
From the credit report, that particular account still shows as charged-off but I found out they have issued 1099-C back in 2017 and they mailed another copy to my current address. I think I know about the tax situation and working with my CPA but not sure if i need to clear that…

. . . we don’t like to call that a “dodge” . . .

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If they issued is back in 2017 and you didn’t report it on your 2016 taxes, you need to report the issue immediately. You will be filing amended tax returns and, right now, you are not in compliance with the tax laws. The fact that you are addressing works in your favor. Don’t mess that up with a failure to self-report.

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Ed if you legally get me out of my tax rate on that amount of money…I’ll call it a banana if you want.

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