tax consequences

it depends.if the forgiven amount is greater than 600.00 the creditor must file and send you a 1099c form.that savings counts as income for the subsequent year.

I had this happen to me and wasnt aware of it until i recieved a letter through the irs saying what i owed them. Never in my life had i owed the irs it was a little scary but after wards it really was not that bad, with the settlement amount plus what i owed the irs it was still well below what i actually owed so it was worth it and the irs will allow you to make a payment plan if you cannot afford to pay in a lum sum, it will cost you a fee of course to do this though.

oh yeah,that's right good info.

When did you get the letter from the IRS? And is is payable with your next tax return (i.e. if I settle this summer it is included in my 2009 return filed in April 2010)?

Or is it payable right after you settle?

I could be wrong, but i believe the amount is more than 600.00 because all my debts were settled for alot more than that and the only one i recieved this on was a discover card which I paid them around 1,000 when i owed them 5,000 and I recieved this letter the summer after it was settled. Scince I did not claim it as income on my tax return. I am not sure what the dollar amount is on this though. Maybe someone else knows, but I know I only had it happen with this one card the difference costed me around 600.00 to the irs. These are not exact numbers, but off the top of my head is what im thinking. Now the irs charged me 100.00 for the payment plan and a very small amount of interest every month so it is best to pay in a lump sum but if you cant do it, its not a big deal. See, I still saved dramaticly. you are correct on your time frame there, but check into it first and find out what that dollar amount is before doing anything maybe we can check around a little for you!

im still looking, but it seems moderator is correct the debt forgiven is more than 600.00. Im not sure if there are certain stipulations or if they write it off a certain way makes a difference or not but ill keep on a looking for ya!

check this link out it may help. There are all different reasons why you may not need to claim it even if you settle for more than a 600.00 difference. Personally I would not be too conserned about this. If you recieve the 1099 and your not comfortable add it as income. But if you dont recieve one I would not worry about it. When you go to file talk to your tax preparer.

http://www.irs.gov/publications/p17/ch12.html#en_US_publink100033015