If a debtor files for bankruptcy and the debt is being handled by the bankruptcy court or has been discharged, you may be in violation of the “automatic stay” (a court order that comes into immediate effect upon the filing of a bankruptcy action, forbidding collection activity against the debtor). You are in violation of the bankruptcy law if you continue to send notices to the debtor. Be sure to stop the notices, including any that are automatically generated by your computerized billing system. Your automated billing system should be set up to allow you to stop the issuance of any further statements to a customer.
After you write off a debt, you may report the amount to the IRS as a tax loss using form 1099-C. You must provide a copy of the 1099-C form to your debtor, and your debtor may be responsible to pay taxes on that amount as income. Your accounting department or financial professional can advise you about the timely filing of 1099 forms and steps to take if your debtor pays a debt that you’ve written off.
Need Help with Michigan Debt Collections?
If you’re struggling to collect debt from a customer, the Muller Law Firm can help execute the collection and make sure you’re compliant with the law. To get help with Michigan-based debt collections, call (248) 645-2440 or fill out a contact form here.
No comments:
Post a Comment