Posted on
January 19, 2010
at
12:57 am
Would you give me an idea as to what the tax implications of debt forgiveness are? I want to see if settling my debt is worth it. Thank you!
Posted on
January 19, 2010
at
1:56 am
Tax implication of debt forgiveness is about 25% of the forgiven (settled amount) debt. Verify that info though with a tax attorney.
Posted on
January 19, 2010
at
1:57 am
Re: Tax implication of debt forgivenessI agree but if the forgiven debt is below $600, you don't have to report that as income on your return.
Posted on
January 19, 2010
at
3:37 am
I see, thank you. One more question, is it true that most settlement companies request their clients to stop the payments to the creditors for 6 months? What would the creditors do to me if I do stop my payments altogether?
Posted on
January 19, 2010
at
3:41 am
They can do several things - but the important thing is not to panic. The creditors (if they are aggressive on suing) would inform you that a legal action is to be taken against you - waiting for you perhaps to make a settlement offer - but I heard that creditors don't really settle for a lesser amount - & they are obligated by the law to write off the debt after 6 months.If you're wondering if it's possible to be slapped a criminal case over credit card debts - the answer is no, & the worst that they could do is sue you for judgment.
Posted on
January 19, 2010
at
4:19 am
To answer you question Buddha Bat about stopping the payments for 6 months - that's because creditors write off bad debts in about that time - and they'd lose profit or any chance of getting back anything from the accounts if they don't pass them on to a third party collection agency - debt settlement companies wait for that because if it's with the creditors - it would not have a chance at settlement. Creditors want the full amount. It's different with collection agencies.
Posted on
January 19, 2010
at
4:24 am
Tax implications of debt forgiveness if you fail to report it? Penalties and more charges. If you do not report what you've saved from debt settlement, then after clearing your old debts via it, you'd have new ones from the IRS..
Posted on
January 19, 2010
at
4:36 am
So if you are still wondering if debt settlement and its tax implications are worth it in the end -- the answer is yes, but do all the right things. Don't skip. Don't forget. Don't make excuses.And you know after doing everything correctly, you'd feel brand new - you have a chance to start over.
