I was not sure where to post this question...

[desperate&broke]

...so if it needs to be moved can a mod or admn do so? THANKS!

I have a question. It's been about 5 months since I stopped paying on my credit cards. Needless to say, the calls have been pouring in non-stop. They are now calling my sister's home and her husband is getting really upset and is starting to be nosy. No one knows of my bankruptcy intentions because I do not think it's anyone's business but but my husband's and mine. Anyway, I called the attorney I chose and told her I wanted to pay the retainer fee to get those calls to stop. My intentions are to do so on Monday morning. HOWEVER, now that I finally am opening my "bills" I was reading that GE Money is offering to wipe 70% off of my total amount due (i.e. I owe them on like 3 cards but I will use one as an example. I owe 9400 on one and they are willing to take 70% off of that amount leaving me a balance of 2K+). Here's my question, if husband and I could scrape up enough to take them on the new amounts is this legit or is it something I should be weary of?

Any insight would be greatly appreciated.

[Keebler]

...so if it needs to be moved can a mod or admn do so? THANKS!

I have a question. It's been about 5 months since I stopped paying on my credit cards. Needless to say, the calls have been pouring in non-stop. They are now calling my sister's home and her husband is getting really upset and is starting to be nosy. No one knows of my bankruptcy intentions because I do not think it's anyone's business but but my husband's and mine. Anyway, I called the attorney I chose and told her I wanted to pay the retainer fee to get those calls to stop. My intentions are to do so on Monday morning. HOWEVER, now that I finally am opening my "bills" I was reading that GE Money is offering to wipe 70% off of my total amount due (i.e. I owe them on like 3 cards but I will use one as an example. I owe 9400 on one and they are willing to take 70% off of that amount leaving me a balance of 2K+). Here's my question, if husband and I could scrape up enough to take them on the new amounts is this legit or is it something I should be weary of?

Any insight would be greatly appreciated.

I've received similar offers and they're generally legitimate. I'd make sure you get something more detailed in writing so it explains how the debt will be reported to the Credit Bureaus. At least one time I was offeren at 1:10 payoff and I think it was a bluff to see if I really had no money to make payments as I was claiming.

Don't forget that debt forgiven is considered taxable as income by the IRS so you'll need to consider that too.

[desperate&broke]

I've received similar offers and they're generally legitimate. I'd make sure you get something more detailed in writing so it explains how the debt will be reported to the Credit Bureaus. At least one time I was offeren at 1:10 payoff and I think it was a bluff to see if I really had no money to make payments as I was claiming. Ok, I have ignored all types of communication with ANY creditors for the past 5 months (I know bad right) but anyway, can I call them regarding this letter and get more info w/o getting harrassed and or myself in deeper trouble with them?

Don't forget that debt forgiven is considered taxable as income by the IRS so you'll need to consider that too. This part, I need more information as I truly do not understand.

See bold above ;)

[woeisme]

If you owe GE Money 20K, and they take a settlement for 5K, the other 15K of debt you owed but they now have "forgiven" is considered by the IRS as taxable income. No, you didn't get the 15K, but the way they see it is that you were able to spend the 15K at some point (charges on your credit card) and now don't have to pay back that 15K, therefore, in IRS logic, that 15K is "income", and you owe them taxes on it. Voila, next year if you don't claim it on your tax form, they IRS will come after you. How do they know you got that settlement? GE Money will be so nice as to inform them, and in fact they are required to report any amount over $600 that they "forgive" so that the IRS can track it down and tax you on it. So Keebler was just answeringyour question about whether or not there was something to be wary about.

[HHM]

See IRS Form 982 and the associated publication that talks about forgiveness of debt. Woeisme is correct in that if $15K of the debt is forgiven, then you will receive a 1099-C from the lender and is considered income by the IRS. However, there are certain exemptions to paying the tax on forgiven debt (i.e. bankruptcy, insolvency, etc).

Whether you should go the debt settlement route depends on many factors. Generally speaking, most creditors want a "lump sum" payment, and not every creditor will give you as much of a discount as that GE Money settlement. Also, forgiven debt is reported on your CRA, so settling does not really do anything positive for your credit report, and if you settle many accounts, is just as bad has filing BK.

[desperate&broke]

Keebler, woeisme and HHM Thank you so much for your input. You all are so patient and very informative.

[no_it_all]

Just a FYI..I don't think a person on the planet (ok, maybe one or two) have ever received a 1099c from a creditor for <forgiven debt). I know that after taking about seven credit card companies to the cleaners for about $120,000 I never got one. Why is that? Well, contrary to what has been posted, creditors are not <required> to send out 1099-c form for canceled debt.

Treasury regulation 26 C.F.R.1.6050P-1 sets forth eight identifiable events—one of which must occur for the creditor to report a debt cancellation on Form 1099-C. Six of the eight identifiable events completely extinguish the debt and preclude any further recovery action to take place. These six events include debts discharged: in bankruptcy, in negotiated settlement, by expiration of the statute of limitations, and through foreclosure, in probate or via receivership. After the occurrence of any one of these triggering events, a debt can no longer be collected because it has legally been extinguished.

So, given that just in this forum alone several hundred, if not thousands of people have experienced these triggering events, how come no 1099-c forms are flooding our mailboxes???? Here is why..

From the IRS web site:
Given the challenging legal problems associated with issuing 1099-Cs, the IRS acknowledges the need for further guidance. The 2007 instructions state “no penalty will apply for failure to file Form 1099-C or to provide statements to debtors until further guidance is issued.”

[no_it_all]

To the original poster, Desperate&broke...don't pay a nickel. Bite the bullet and go BK. Then paying taxes on the <forgiven> about is moot because you will have met the exclusion the IRS allows via US Code Title 11 of the Bankruptcy Statutes...and not have to pay a nickel to them either! Ya gotta know how the systems works!

[no_it_all]

Don't forget that debt forgiven is considered taxable as income by the IRS so you'll need to consider that too.

You know, if people keep spouting this stuff, some poor sap is going to start believing it...How about a <Sticky> so this bad info isn't spouted off every couple of months???

[Keebler]

You know, if people keep spouting this stuff, some poor sap is going to start believing it...How about a <Sticky> so this bad info isn't spouted off every couple of months???

What's YOUR source for bad information? Here's mine...

Linked here for convenience and quoted below.

(Right in the center of Page 82)



Source:
Department of the Treasury
Internal Revenue Service

Publication 17
Catalog Number 10311G

For use in preparing 2007 Returns

Your Federal Income Tax For Individuals


Part Two Income
Chapter 12 Other Income

Canceled Debts

Generally, if a debt you owe is canceled or
forgiven, other than as a gift or bequest, you
must include the canceled amount in your in-
come. You have no income from the canceled
debt if it is intended as a gift to you. A debt
includes any indebtedness for which you are
liable or which attaches to property you hold.

If the debt is a nonbusiness debt, report the
canceled amount on Form 1040, line 21. If it is a
business debt, report the amount on Schedule C
or Schedule C-EZ (Form 1040) (or on Schedule
F, Profit or Loss From Farming (Form 1040), of
the debt is farm debt and you are a farmer).

Form 1099-C If a Federal Government
agency, financial institution, or credit union
cancels or forgives a debt you owe of $600 or
more, you will receive a Form 1099-C, Cancella-
tion of Debt. The amount of the canceled debt is
shown in box 2.

[HHM]

You might want to actually try reading the publication you cite before YOU SPOUT MISINFORMATION. None of what you posted, if you actually read the publication you cited, is contrary to the information that has been posted previously.

[no_it_all]

My gawd, am I the only one here with reading comprehensioin beyond 6th grade?
From the IRS web site:

2. Is Cancellation of Debt income always taxable?

Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:

Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you.You are insolvent when your total debts are more than the fair market value of your total assets.


So, anyone with a 6th grade reading level can see that saying

Don't forget that debt forgiven is considered taxable as income by the IRS so you'll need to consider that too.

is of course incorrect.

In addition claiming that Woeisme is correct in that if $15K of the debt is forgiven, then you will receive a 1099-C from the lender is also incorrect, since the IRS DOES NOT REQUIRE CREDITORS TO SEND OUT 1099-C .....Again, reading comprehension is a wonderful thing!! Many, many, many people have NEVER received a 1099-c....

AGAIN from the IRS web site: Given the challenging legal problems associated with issuing 1099-Cs, the IRS acknowledges the need for further guidance. The 2007 instructions state “no penalty will apply for failure to file Form 1099-C or to provide statements to debtors until further guidance is issued.”

[Keebler]

My gawd, am I the only one here with reading comprehensioin beyond 6th grade?
From the IRS web site:

2. Is Cancellation of Debt income always taxable?

Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:

Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you.You are insolvent when your total debts are more than the fair market value of your total assets.


So, anyone with a 6th grade reading level can see that saying is of course incorrect.

In addition claiming that Woeisme is correct in that if $15K of the debt is forgiven, then you will receive a 1099-C from the lender is also incorrect, since the IRS DOES NOT REQUIRE CREDITORS TO SEND OUT 1099-C .....Again, reading comprehension is a wonderful thing!! Many, many, many people have NEVER received a 1099-c....

AGAIN from the IRS web site: Given the challenging legal problems associated with issuing 1099-Cs, the IRS acknowledges the need for further guidance. The 2007 instructions state “no penalty will apply for failure to file Form 1099-C or to provide statements to debtors until further guidance is issued.”

Thank you for the clarification. I knew we were talking about negotiating a settlement on an account and my comments have been regarding that situation. The subject of Bankruptcy had also been brought up and it deserves to be emphasized that debts forgiven in bankruptcy are not treated the same. I linked the entire document in the hope that my information would cause interested people to read further.

The question of whether something is taxable doesn't revolve around whether a 1099 is issued or if the transaction was reported to the IRS and that seems to be the point of your argument.

A 1099 generally means the transaction is visible to the IRS and you'd be a fool to fail to claim it because you are likely to get caught.

Without a 1099, the transaction doesn't stop being taxable. True, the lack of a 1099 probably means that the IRS isn't aware of the transaction and the individual that claims it as income will be the first time the IRS has a clue. At that point failure to report it is a gamble that each person needs to weigh. The arguement isn't one of "is it taxable" but one of "will I get caught."

The underlying principal is still the same: Debt forgiven is generally taxable as income unless there's an exception that applies to your situation. Bankruptcy is the easiest and most obvious exception and insolvency deserves consideration.

[HHM]

Thank you for the clarification. I knew we were talking about negotiating a settlement on an account and my comments have been regarding that situation. The subject of Bankruptcy had also been brought up and it deserves to be emphasized that debts forgiven in bankruptcy are not treated the same. I linked the entire document in the hope that my information would cause interested people to read farther.

The question of whether something is taxable doesn't revolve around whether a 1099 is issued or if the transaction was reported to the IRS and that seems to be the point of your argument.

A 1099 generally means the transaction is visible to the IRS and you'd be a fool to fail to claim it because you are likely to get caught.

Without a 1099, the transaction doesn't stop being taxable. True, the lack of a 1099 probably means that the IRS isn't aware of the transaction and the individual that claims it as income will be the first time the IRS has a clue. At that point failure to report it is a gamble that each person needs to weigh. The arguement isn't one of "is it taxable" but one of "will I get caught."

The underlying principal is still the same: Debt forgiven is generally taxable as income unless there's an exception that applies to your situation. Bankruptcy is the easiest and most obvious exception and insolvency deserves consideration.

I think that sums it up nicely.

The 1099 issue is a reporting issue and as Keebler pointed out, is different than whether the forgiven debt is taxable. You may be correct in that lenders are not "strictly" required to issue a 1099, but that does not affect the taxable nature of the forgiven debt. But granted, if no 1099 is issued, the debtor could probably "get away with" not worrying about the forgiven debt as income come tax time. Also, except in the BK context, the burden is generally on the debtor to demonstrate that the forgiven debt is not taxable. Thus, I will almost always refer someone to IRS Form 982 and the associated publication so IF they do get a 1099, the know what to do with it.