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#2272091 - 06/24/22 04:59 PM Collections, Garnishments, Etc.
JD984 Offline
Member
Joined: Dec 2019
Posts: 52
KS
We are looking at putting some procedures in place for when a loan goes bad, and I was wondering if anyone would be willing to share how their bank handles things.

Do you guys send all bad debt to collections? Do you obtain a judgment and garnish? When you charge off loans do you typically send 1099-C's? We are a small community bank and our lenders typically want to "work with the customer", but sometimes it seems like the borrowers get off scott-free (and sometimes they literally do).

Thanks to anyone who offers their input!

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#2272092 - 06/24/22 05:32 PM Re: Collections, Garnishments, Etc. JD984
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
That is a huge subject, and it might be worth a sit down with your legal counsel to determine some basic thresholds and collection costs involved by going down the various roads. First thing is what is the universe of bad debt, what sort of debt, and what are your options for collection in each case. Turning them over to a reputable collection agency, just attempting internal collection activities, taking legal action to obtain a judgement, repossession of collateral, foreclosure on real estate, etc.? You could break it all down into chart format and then maybe additionally add some dollar amount tiers.

As far as 1099-A and C reporting, that is not optional, but you really need to read the instructions for the triggers of the required filings:
https://www.irs.gov/instructions/i1099ac
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