No assets, no other debts. I figure i can settle one card (7K owed) for <4k, come tax time I should get the 20% back and settle the other one. (6K owed). Looking to start college in Jan, delivering pizzas for job, keeping my income low enough to maximize fin aid. Will this action get me to zero and a fresh start?
you will probably owe $1000-2000 income tax on that $8000, depending on your other income - and that additional $8000 will show up as income on your tax return. why would the credit card companies automatically settle for 60% of what they are owed? Are you 1 year behind in payments? if not, I doubt they will settle and if you are, you may have trouble getting a loan for school
on Sep 23rd, 2009 at 10:15 am
you will probably owe $1000-2000 income tax on that $8000, depending on your other income - and that additional $8000 will show up as income on your tax return. why would the credit card companies automatically settle for 60% of what they are owed? Are you 1 year behind in payments? if not, I doubt they will settle and if you are, you may have trouble getting a loan for school
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on Sep 23rd, 2009 at 10:50 am
If you cash out your IRA, you lose a 10% penalty off the top, and you will owe income taxes on the amount you withdraw as well, so in the end, your 8K will probably be only about 6K. Chances are that the credit card company is not going to be eager to settle for a small percentage…and in the meantime you’ll ding your credit rating (and possibly make it difficult to get that financial aid you need).
You would be better off to try and do a balance transfer to a lower rate, then work extra hours as much as possible to pay off your balance.
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