What about the taxes on forgiven debt?

Date: Sun, 01/25/2009 - 11:20

Submitted by on Sun, 01/25/2009 - 11:20

Posts: 202330
Credits:
[Donate]

My question to the community is: If I settle with a credit card company on a 10,000 card for 5,000 I will owe taxes on the forgiven 5,000. When tax time comes, what if I don't have the money to pay the taxes? Has anyone had experience with this situation? I have heard the IRS doesn't mess around and they worry me more than the credit card companies. Any insight would be appreciated!

Total Replies: 4

If you are insolvent then you are in the clear. If not then tha

If you are insolvent then you are in the clear. If not then that means you have the means to pay the IRS.

Submitted by on Sun, 01/25/2009 - 14:22

( Posts: 202330 | Credits: )

I am interested in your question also. Because right now I am in

I am interested in your question also. Because right now I am insolvent, with more debt than assets. But as these accounts get settled, I will not be insolvent forever. *cringes* At least I will be for 2008. It is something I will ask my accountant. I have had the same guy since 1985, and he knows the big hole I've dug, inside and out.

Submitted by SusieQ on Sun, 01/25/2009 - 14:31

SusieQ

( Posts: 302 | Credits: )

Where can I find a copy of the insolvency rules/criteria? D

Where can I find a copy of the insolvency rules/criteria?

Does it include home equity? And at what point in time is this measured, pre-settlement, or post-settlement (or 12/31 year end)?

Submitted by ball_mich on Sun, 01/25/2009 - 14:42

ball_mich

( Posts: 360 | Credits: )

The day the debt was settled. Yes if you have equity in your ho

The day the debt was settled. Yes if you have equity in your house it is an assett. Add all assetts - all debts. In my case I owe 165000 on my house and the FMV is 125000 at best. Plus with all my credit card debt, cars, etc I am insolvent by like 100000.

Submitted by on Sun, 01/25/2009 - 15:26

( Posts: 202330 | Credits: )