Charging off a debt and sending out a U.S. Internal Revenue Service cancellation of debt form does not end a debtor’s responsibility to pay what is owed, the state Superior Court has ruled in an issue of first impression.
A three-judge panel ruled March 3 in Verdini v. First National Bank of Pennsylvania to adopt federal precedent on the issue of whether debtors are still liable for their debts despite the lender charging off—or abandoning the debt for accounting purposes—and sending out a 1099-C form, which lenders send to debtors when the debt is classified as canceled. The ruling upheld the lower court’s decision to dismiss the debtor’s lawsuit over the bank’s refusal to discharge the debt.
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