pay-off consequences
Date: Tue, 06/15/2010 - 12:59
1. they mentioned the difference in outstanding principle and the settled amount it taxable income
and
2. Agreeing with the amount, once reported to the credit bureau, i.e. Equifax, etc., it will decrease your credit score instead of, in my understanding, increasing your credit score because of overall lowered debt.
Any of this make sense or is it a scare-tactic?
Neil, Yes, it all makes sense. You may want to read some more on
Neil,
Yes, it all makes sense. You may want to read some more on this forum, but it is my understanding that the difference between the actual amount you owe and the settled amount can be considered income for you and the cc company can send you a 1099 and you would be responsible to pay taxes on that amount when you file your income tax. Of course that is still only a fraction of what you owed in the first place.
The deal with the credit report is also true. When you settle on an amount your credit score will drop due to the fact that it is reflected that you did not pay as agreed by paying an amount less than what you actually owed. If your cc companies are argreeing to a settlement than you are most likely already 90-120 days behind and your credit has already been affected by that. Settlement of cc accounts will hurt your credit, but not to the same extent that a bankruptcy does and it will damage it as long as a bankruptcy. Debt settlement is a good option if you are unable to make your payments each month.
You may also want to put in the name of the cc companies in the google search at the upper right hand corner of this page. You will find other discussion threads that will tell you what other people with those companies have settled for. I have seen that some companies will settle for as little at 30%.
Good Luck to you.
I believe both of those things are true. 1. Forgiven debt can c
I believe both of those things are true.
1. Forgiven debt can count as income. They lent you money and you aren't repaying it. Therefore, you got to keep the money. That is income.
2. Settling a debt hurts your credit score because it means you borrowed money and didn't repay it. That isn't a good thing. That isn't what other potential lenders want to see. They want to see a customer who pays his debts, not one who borrows money and then skips out on the bill.
thing that gets me about the tax issue... most likely it took ye
thing that gets me about the tax issue... most likely it took years to run the debt up on cc. but they want you to pay tax on the discharged amount in one year. but if you have the proper papers done (income statement & liabilities statement) to show that you are insolvent, there is a form to fill out and file with taxes that will not make the discharged amount taxable. but it makes you more likely to be audited on tax refund..
