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Debt Settlement

I received a 1099-C from the credit card company saying that my debt of $10,123.00 has been forgiven. The forgiven part is great, but do I have to pay tax on that amount now?
Unfortunately, any amount of debt that is forgiven is considered "income" and you may receive a 1099 at the end of the year indicating that the creditor has notified the IRS. Under certain circumstances, filing IRS Form 982, could allow you to reduce or exclude this amount. Consult a tax professional for more information.
Do I have to pay taxes on a debt settlement?
The difference between what you owe and what you settle an account for is considered income by the IRS. It is the responsibility of the creditor to notify the IRS and send you a 1099 form. If you don't receive one, the IRS probably hasn't been notified. If you do, they probably have. In our experience less than 20% of individuals receive 1099 after a settlement.
Shouldn't I hire a professional to negotiate a settlement for me?
The benefits of hiring a professional negotiator is that they are—well—professionals. Many of the larger settlement companies can also negotiate better terms than individuals due to the large amount of debt they control. Speak with an accredited negotiation professional and check out our tutorial on DIY Debt Settlement before you make a decision.
I want to settle with my credit card company. What do I want to ask them to report to the credit bureaus?
You can ask them to delete the tradeline altogether, or update the record to state "paid as agreed". Note that
You can ask them to delete the tradeline altogether, or update the record to state "paid as agreed". Note that if you are settling with a debt collector they may or may not be able to update the original creditor's tradeline. Always ask.