I had gap insurance. why did i get a cancellation of debt for the amount the insurance paid?

Question

my truck was stolen the insurance paid 23,000 i owed 30,000 gap insurance paid the difference why did i get a 1099-c cancellation of debt

Answer 1

Hi,

I used "Credit Solution" to settle my debt and improve my credit score.They managed to reduce my debt up to 58%.It's legitimate.I came across this company on NBC News Special Edition.Check it out here:

http://starturl.com/tyjxb

Answer 2

That is odd. When you settle a credit card for less than the amount owed you still have to pay taxes on the difference becuase the government sees this as earned income.

For example: if you have a credit card and you owe 2,000 and agree to close the account at 1,000 you would be charged tax on the remaining 1,000 as earned income.

I am guessing this is the same for GAP insurance. The insureance is paying off the remainded or your loan so the goverment sees the amount covered by excess as earned income. I hope this is not the case! These insurance companies always have a loophole to s***w us!

Answer 3

You'll have to call the company that issued the 1099C.  

It's highly possible that it wasn't true "insurance" - that the gap was a takeover of the loan balance, which the new company then "forgave", making it taxable income.  

But you will have to call them to be sure.  If it was true "insurance" then it shouldn't be taxable.

Answer 4

When a debt is cancelled, it is money you received that you do not have to pay back, therefore, it is taxable income (unless you are indigent).