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Business Debt/OIC, release of personal guarantee but LLC still liable for debt

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Question
Hi Jason:
I did an SBA OIC 3 years ago and paid it in full 2 years ago. My personal guarantee was released. The LLC is/was a sole member LLC. I was told by that I would need to declare the forgiven amount as income on my personal taxes since the sole member LLC passes through to my personal tax. I declared the forgiven amount but never received my 1099C as the bank and SBA said I would. I recently called the SBA to ask where it was and they said the debt has actually been referred to the US Treasury for collection....from the LLC that no longer operates and was dissolved.

I told them the LLC has no assets and has not operated in 4 years. They said I will still get calls for it since the LLC is still liable for the debt. They agree I am not personally liable but I still get called for the forgiven amount.

Two questions:
1. How long will they keep calling before they finally issue a 1099C?
2. I already declared this cancelled amount as income 2 years ago. What happens when they finally do issue a 1099C years later? How do I explain that to the IRS?

Answer
Hi Drew,

I have never heard of anyone declaring income on a settlement before receiving a 1099, so I can't address that part.  Some banks are so unorganized they never send a 1099 so its hard to predict when (or if) they will send one.  I would say you should ask a CPA about what to do if a 1099 is sent in the future.

If the LLC is closed and there are no assets, you have no reason to respond or bother dealing with the Treasury or collection company.  As long as you are not personally liable that's the only thing that matters.  

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Jason Milleisen

Expertise

Jason Milleisen is the founder of Distressed Loan Advisors, and offers expert advice about dealing with SBA Loan Default. I have written numerous articles about SBA loan issues, and you can read them all at www.JasonTees.com. My services include assistance with debt settlement (aka Offer In Compromise), loan modifications, and lien releases. If it has to do with an SBA loan, I can likely be of service. Before I started my own debt settlement firm, I was an SBA workout officer at a large SBA lender, and handled and $85,000,000 delinquent loan portfolio. I negotiated directly with the SBA, so when it comes to settling SBA debt, I can say with confidence that there are no workout consultants out there who have as much first hand knowledge as I do. When it comes to SBA loan default, there is very little that I have not seen, so you can feel confident that my advice is based on past experience.

Experience

Jason, the founder of DLA, has experience with all types of loans and businesses, from $5,000 unsecured lines of credit all the way up to $1 Billion large corporate syndications. He has 10+ years of commercial loan experience, and was trained at the 2nd largest financial institution in the world. Jason also spent 2+ years as an SBA workout officer, where he reviewed and negotiated SBA settlement offer with client.

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Bachelors of Business Administration Major: Finance Minor: Accounting

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