I owe about 22,500 in debt, and got a letter to settle for 15,700. It is extremely tempting but what are the negatives of having to file a 1099C if I continue to have good, regular income? I had extreme debt & bad luck paying it off, then got an awesome job and sold some stock so I am in the clear. Should I take that 7K discount or will it bite me bigger than that in the end? What I mean is will it bite me by either having that on my record, or paying more taxes? Thanks for the replies - I am trying to research online also. 
Do 1099C's go on your credit report as bad debt? I am so naive…! Or showing that you have a 1099c and settled is a plus? Should I get bakc in the game for the long haul and pay that extra 7K? (worth not tarnishing my credit further?)
Negatives - you will have to claim the remaining amount of your account after settlement as income and then pay taxes on it (hence the 1099 form). Also - a settlement is a major delinquency on your credit report which will continue to report for the next 7-10 years. The 1099 will not reflect on your credit report. The account will show as "legally paid for less than the full balance" which isn't the best thing to have on your credit report.
Things to consider when settling:
1) If you can afford to pay $15,700, will the remaining debt ($6800) be manageable on a monthly basis (should be about $160 depending on your interest rate)? If so, then pay a good chunk of you debt off and handle the rest of your balance normally to avoid settelment. Remember that a smaller balance will mean lower monthly payments which can actually help to BUILD your credit up rather than ruin it.
2) Is the likelihood that you will end up charging off the account greater than ever paying it down? Do you have more money going out every month than comes in? Settlement may be a better option for you as "charging off" your account looks much worse than settling.
Always try to avoid a settlement by calling your creditor to see if you qualify for a hardship or payment program. If you can commit to some long term monthly payments this will greatly benefit your credit overall and avoid you worrying about 1099 forms.
Lastly - don't bother asking creditors to remove your delinquent account from your credit report after you settle. They are legally not able to do this as they are bound to accurately report the status of your account to the credit reporting agencies.
on May 9th, 2009 at 4:25 pm
You will be liable for the forgiven debt on your tax return. You have to report what is on the 1099C to the government as income and the "cost" of this to you is that amount times your marginal tax bracket (e.g., if you are in the 25% bracket, $1,750 or 25% x $7,000). I suggest you try and work for more time with the lender. This way, even though it costs you more out of pocket you don't have to go through life worrying about others' perceptions about your credit report. This is especially true in your case since you now have a good job and will presumably stay employed in it over the long-term.
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on May 9th, 2009 at 4:39 pm
Do you know for a fact that they are gong to take a write off on this debt? The IRS won't know unless the creditor files a 1099c on you. Many times they don't send you a copy, leaving you to worry about the tax consequences.
So lets assume they do….you will owe taxes on $6800. Don't know your tax bracket, but assuming 15%, you will owe around $1020.
If that's what it will take to get this off your credit history (assuming it's the only bad mark), then do it.
But remember my warning….get it IN WRITING that they will remove this from your record before you pay them a dime. What is the sense paying them and still having bad credit. Isn't that the purpose of paying them??
I can see the collectors out there now…clutching their heart….
What? Studly said pay a bill????
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on May 9th, 2009 at 4:45 pm
First of all if they offered to settle it for fifteen seven they will easily go twelve.. it is ridiculous what they get away with because you probably owed around 17000 in the first place and now they say you owe 22000..
So if you don't pay what those imbeciles inflated the debt to - now you get to pay taxes because.. your not paying their bull#(*#* fees is considered a profit.
Profit?! Income?!! my @##.
I can't advise you to ignore it at tax time but I sure as all hell would. Again.. Income, MY WELL MADE @$$!
Secondly, alot of types of negative reportings can be deleted. Make them sign a deletion agreement BEFORE you pay and that way you can sue them if it does not come off.
Thirdly, be careful what you pay and do not pay.
BY PAYING CERTAIN TYPES OF DEBTS YOU WILL HURT YOUR CREDIT SCORE/REPORT AND RESET THE SEVEN YEAR CLOCK.
BE CAREFUL.
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on May 9th, 2009 at 5:12 pm
Negatives - you will have to claim the remaining amount of your account after settlement as income and then pay taxes on it (hence the 1099 form). Also - a settlement is a major delinquency on your credit report which will continue to report for the next 7-10 years. The 1099 will not reflect on your credit report. The account will show as "legally paid for less than the full balance" which isn't the best thing to have on your credit report.
Things to consider when settling:
1) If you can afford to pay $15,700, will the remaining debt ($6800) be manageable on a monthly basis (should be about $160 depending on your interest rate)? If so, then pay a good chunk of you debt off and handle the rest of your balance normally to avoid settelment. Remember that a smaller balance will mean lower monthly payments which can actually help to BUILD your credit up rather than ruin it.
2) Is the likelihood that you will end up charging off the account greater than ever paying it down? Do you have more money going out every month than comes in? Settlement may be a better option for you as "charging off" your account looks much worse than settling.
Always try to avoid a settlement by calling your creditor to see if you qualify for a hardship or payment program. If you can commit to some long term monthly payments this will greatly benefit your credit overall and avoid you worrying about 1099 forms.
Lastly - don't bother asking creditors to remove your delinquent account from your credit report after you settle. They are legally not able to do this as they are bound to accurately report the status of your account to the credit reporting agencies.
References :
on May 9th, 2009 at 5:52 pm
Send me some dosh nunya, I spazzed all my wages on a horse, will give it you back next month, HONEST!!!
References :
MY LOANSHARK