But even if the debt was sold several times over, apparently everyone who bought it can threaten your life, phone your employer at their home, serve you and have your wages garnished if you don’t show up, etc. If four people bought the debt, all four could in theory collect it. Sure, with good record keeping you might be able to win in court, you know, every time you go to court, which, apparently, could be any number of times for the same debt if more than one person is buying it.
We all knew he didn’t actually give away $15M. They told us they spent $60k to buy the debt, so it would be pretty weird to value it at much more than that. But if the law in at least one state says that an excel spreadsheet saying you owe someone money is assumed to be correct, there is no reason the same debt can’t be sold and collected on multiple times.
Since the debt in question was not for the most part not legally enforceable and amounted to extortion by annoyance, it is easy to make a case to the IRS that this is not debt forgiveness under the tax code definitions of it.
The point behind declaring debt forgiveness income is that as a legitimate debt, you are using your income to pay it off on a regular basis. Forgiving it frees up income which would normally have gone towards it. Therefore, income.
In the case of the debt forgave by John Oliver, it was less a debt forgiveness in a traditional sense as it was, “get these harassing asshole collectors off my back”. Since this was not debt that was being paid off by the debtors nor in most cases even legally enforceable.
At least that is how I would explain it if I got audited or went before a tax court on the issue.
Again, it is easy to make the case to the courtroom in your head. The IRS will quite probably disagree. Novel legal theories generally do not impress the government.
[quote=“daneel, post:15, topic:79196, full:true”]
I will never understand this.[/quote]
I’ll see if I can help, having been professionally involved from the collection side.
[quote]I have an agreement with company A. I owe them x dollars.
Something goes wrong and I am unable to pay them what I owe (or compound interest gets out of hand or whatever).[/quote]
It’s important to understand that what went wrong has a huge influence on what happens next. If you are permanently disabled and cannot pay, what happens is supposed to be totally different from what happens when you knowingly take on debt that you never could pay, by misrepresenting yourself to a lender.
However, it’s true that what is supposed to happen is not always what happens. Sometimes a debtor is a raging ass towards the hapless wage slave who has been assigned to determine what’s gone wrong; if you are the type of person who uses rude language with people you don’t know, you might want to reconsider that. If you are a caring, considerate and polite person you will always get treated better by other humans than a raging, screaming overentitled jerk.
No. First they offer you a deal. If you will commit to a payment schedule that nets them more money than they can get selling the debt, they will do that, because it’s better for the lender in every possible way. When you refuse to commit to such a deal, or if you cannot manage to pay at least something close to what a collection agency will pay, then and only then will they sell the debt. At which point what they do with the difference is not exactly “writing it off” but we’ll ignore that.
The lender (who may be a hardware store or bar owner, or perhaps the local children’s hospital) will go out of business if nobody has to pay. Forcing them to eat debt means that they starve, you starve, everybody starves. Businesses fail due to uncollected accounts all the time. You’ll need a far more sweeping reform of the system than simply declaring debt isn’t transferrable if you want a workable system.
And if you think about it, you almost never pay a provider of goods or services anyway. Do you pay a doctor who sets your broken leg? No, the doctor can barely understand algebra, you pay his secretary or the hospital’s accounting service or an insurance company. Do you pay the CEO of Campbell’s when you buy a can of condensed soup? No, you pay the cashier at the Piggly-Wiggly, and at the time she’s working for free - she hasn’t been paid yet - and the store bought the soup on credit with the hope that the cashiers will turn in enough money to pay both their own wages and the store’s bills. Debt is transferred in millions of ways all around you all the time. Transferrable debt is not a broken piece of an otherwise workable system, although you can certainly argue that the whole system is broken.
Point taken to some extent, but I was massively taken aback when I bought a house in the US and was rapidly informed that the mortgage had been transferred. I thought that was really weird, but apparently that’s just how people do it here? Now I owe hundreds of thousands of dollars to a company I’ve never heard of, let alone have a business relationship with. I deliberately went through the same credit union I bank with, and that turned out to be a total waste of my time.
As far as medical bills go (beyond the fact that nobody - insert standard single-payer rant here - should have to pay them directly anyway), if you don’t pay the doctor, how does that fit with the idea that you might end up in an ER that’s in your network, but then get stiffed by your insurance because the doctor that saw you was (unbeknownst to you) not in the same network as the hospital they were working in, so you’re on the hook for it all?
As far as loans go, the risk of having to eat the debt is why charging interest is acceptable.
Did I mishear… for not very much money ( speaking relatively, most likely ) you get a spreadsheet which includes among other things social security numbers? This seems like it should be generating a considerable amount of alarm.
That’s an unusual viewpoint. Generally a lender gets to charge interest because a borrower needs money, and a promise of profit is how a lender is persuaded by the borrower to make the loan.
Edit: I apologise for the tortured grammar. I gotta go, no time to make it better!
The couple of times I really had to deal with the IRS had to do with their screwups. I have to say when you can document your position, they don’t act like assholes and admit being wrong.
Correct. If you want a lender to assume higher risk, a debtor will need to promise greater profits. The lender can afford to have a small portfolio of high risk loans as long as the low risk loans can pay for the probable losses in the high risk pool.
It’s just math. If the debtor can’t pay, everyone loses. There is no incentive for bad loans, absent titanic goverment bailouts of favored businesses at the expense of society… oh, whoops… how did that happen? So much for capitalism, I guess; as Karl Rove reportedly said, “We’re an empire now”.
I feel like something is getting lost in translation here- I was saying that the reason credit exists is because there is profit to be made from interest, and that the reason interest can be charged is essentially as compensation for the risk that comes with loaning money.
It feels like you’re both agreeing to and arguing against that line of thinking.
Although the theory proposed is based on extrapolation from modern conditions and reasonable assumptions, it’s historically false. If I say “the reason we drink cow’s milk is that cows suffer when they are not milked, and once we have got the milk the easiest and most sanitary way to get rid of it is to drink it” I’ve taken several truths and built a falsehood, by imputing motivation that is incorrect.
Banks aren’t “permitted to charge interest because of risk,” although it seems perfectly logical and you can probably find transparently specious claims to this effect in the texts of law. In those places where lenders are legally allowed to charge interest, the motivations of the lawmakers were not so straightforward, and were mostly driven by antisemitism* and rationalization of the divine right of kings. I recommend to you the Wikipedia article on usury, which gives a simplified overview of how religion and culture (rather than logic or reason) have shaped the laws governing lending. It’s quite fascinating to trace the complex histories involved, really.
* meaning predjudice against both Arabs and Jews (the semitic peoples) not just anti-Jewish religious bigotry, although the latter was certainly a major factor.
Banks are allowed to take in depositors’ money and invest it in relatively “safe” investments such as commercial paper and government bonds. In return, they are required to maintain enough cash on hand to cover a certain percentage of depositors all showing up on the same day for their money back, and they are required to make various types of loans available to the local community. They are allowed to make a profit off of those loans too, but there are rules to keep them in line with local needs. (The Community Reinvestment Act, for example; they can’t just loan to rich white guys who want to buy sports cars and mansions.)
Before the loosening of banking regulations, there wasn’t a lot of actual risk because all bank loans were collateralized in some way. When they got the regulations eased so as to keep up with mortgage and investment companies, the loans got a lot more risky but the amount of interest charged wasn’t entirely tied to that. Remember, they HAVE to loan money to be a bank. It’s a federal requirement. But with less oversight, it was easier to get away with charging more for loans. It was a vicious circle, basically, thanks to trying to keep up with the non-bank companies who were making a killing.
