I had a loan with CitiFinancial and I used my car as collateral, well I got a thing from the irs saying that they sent in paper work that is called cancellation of debt on the loan and I now have to pay taxes on that debt. My question is now that they cancelled my debt since my car was used as collateral does that my car is mine or is the cars theirs? Cause if it is mine they never sent me the title and how should I go about getting it
1 Answer from Attorneys
No, you do not necessarily have to pay taxes on cancelled debt. See form 982. If your debts outweigh your assets by the forgiven amount, you pay no taxes at all. If they outweigh your debts a little, you can exclude some of the debt but not all. If you have more assets than debts, you are not insolvent and in that case you have to pay. See a real CPA who is familiar with form 982 or email me at firstname.lastname@example.org and I can send you some information about it. This is not tax advice and I am not a tax attorney per se - a competent CPA is all you need though.
Your car is still your car but the lender may have a lien on the title. Was this lender listed as a lienholder on your car title? Or do they just have possession of the title? Their remedy would be to repossess the car but for whatever reason, the lender has elected not to do so if they held some kind of lien on the title. They have given up collecting on the debt.
If they still hold the title then you are only going to get it by paying something. The lender may have given up trying to collect and they figure that eventually the car will be worthless. That does not mean the lender is going to release the title. However, if you have to pay them any added money then they should file an amended 1099c.
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