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Old 06-09-2010, 04:57 PM
hemi68charger hemi68charger is offline
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Join Date: Jun 2010
Location: Houston, Texas
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Default impact on paying back credit card debt...

Wife just talked to a couple of the credit card companies we have debt with. In chatting with them and agreeing on a lowered "settled" amount, the agent mentioned something to her that she wasn't sure about and not comfortable with;

1. they mentioned the difference in outstanding principle and the settled amount it taxable income


2. Agreeing with the amount, once reported to the credit bureau, i.e. Equifax, etc., it will decrease your credit score instead of, in my understanding, increasing your credit score because of overall lowered debt.

Any of this make sense or is it a scare-tactic?
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Old 06-10-2010, 03:51 AM
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sapphirecapital sapphirecapital is offline
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Join Date: Sep 2007
Location: Montecito, CA, USA
Posts: 364
Default Re: impact on paying back credit card debt...

number 1 is yes, you have to pay taxes on the difference between the settlement and outstanding amount
number 2 yes it will lower but not as much as if you do not pay at all and you recover faster.

If you have the money buy the whole claims at a discount through a company and then notify the credit bureau all is paid
Answers are for general information only and should not be construed or relied upon as legal or financial advice.

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Old 08-28-2010, 03:49 AM
goodyphilips goodyphilips is offline
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Location: New York
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Default Re: impact on paying back credit card debt...

As a credit card user, i found this information extremely useful. thanks for this so informative response.
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Old 08-28-2010, 09:56 AM
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DavidBibby DavidBibby is offline
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Location: Palm Bay, FL
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Default Re: impact on paying back credit card debt...

This is something the debt settlement companies may not explain up front.

When you settle a debt.. the amount that is "Forgiven" is considered taxable INCOME.

If you settle a debt this year.. and you have been forgiven of debt over $600.. you MUST claim it on your taxes or the IRS will send you a letter.
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