Numerous Questions/Advice Needed

[jaeahr]

Hi all. Really new to the forums but I have a lot of questions and would love some advice.

I've been out of the states for a number of years now and while I was gone all my credit cards went to creditors. I came back to the States fairly recently and found all this out and seems no excuse is good enough for these creditors.

I checked my Credit Report recently and have 540-600 scores from the 3 bureaus.


First Question.

I was given numerous settlement offers from these creditors and I was wondering if I should take them or just pay in installments of the full balance.

- does paying the settlement offer affect my already messed up credit?

Second Question.

On my Credit Report from Transunion on one of the comments it says
Comments: Profit and loss writeoff

What does this mean exactly?


Third Question.


I have 4 Creditors go after me but only 1 is showing up on my credit report.

How does this affect my credit report?

How do the 3 bureaus know that my creditors have been paid off?


-----

Lately I've been trying to get new credit cards and am being denied left and right.

What's my best option for obtaining a credit card or even raising my credit score?

[lrprn]

I was given numerous settlement offers from these creditors and I was wondering if I should take them or just pay in installments of the full balance.

If you settle for less money than you owe, the creditor will be satisfied BUT you will owe income taxes on the amount forgiven. Can you afford that?

- does paying the settlement offer affect my already messed up credit?

The creditor will mark your account paid in full, but you still have the outstanding taxes issue to deal with.

On my Credit Report from Transunion on one of the comments it says Comments: Profit and loss writeoff. What does this mean exactly?

Just means that this creditor wrote off your debt, but very likely sold it to a collection agency.

I have 4 Creditors go after me but only 1 is showing up on my credit report. How does this affect my credit report?

Right now your credit report is the least of your worries. You need to figure out how to either pay off what you owe or file bankruptcy.

How do the 3 bureaus know that my creditors have been paid off?

The creditors or collectors report paid in full to the credit agencies.

Lately I've been trying to get new credit cards and am being denied left and right.

You are getting denied because your scores and payment history are terrible. Also every time you apply, your credit scores drop because of the hard hits from the creditors checking on your low credit scores and poor payment history.

What's my best option for obtaining a credit card or even raising my credit score?

Stop applying for credit cards, get a debit card from your bank or credit union, learn to live within what you make, and make all your payments on time for at least six months to a year. There are really no other options until you get control of this debt either by paying it down considerably or declaring bankruptcy to get a fresh start. Then time and on-time payments will heal the damage to your credit.

[phoenyx]

If you settle for less money than you owe, the creditor will be satisfied BUT you will owe income taxes on the amount forgiven. Can you afford that?
. . .

I wanted to mention there are situations where the amount of cancelled of debt (COD) is NOT considered income and does NOT increase income tax.

These situations most likely apply to people on this board more than the standard population, so I think it's very important to point out when discussing COD and tax liability.

Excluding COD from taxable income can be a complicated issue, and one worth discussing with a tax professional. I can also recommend reading further details at http://en.wikipedia.org/wiki/Cancell...of_debt_income, which is a wikipedia article I have contributed to on the matter.

COD is excluded from being counted as taxable income if: (1) it occurs in a bankruptcy; or, (2) the taxpayer was insolvent; or, (3) it is related to a qualified farm; or, (4) if is related to a qualified real property business; or sometimes, (5) if there is a genuine dispute about the amount of debt owed in the first place.

Therefore, even if you don't file bankruptcy, if you were insolvent, the COD might not be considered as taxable income. Insolvent means that the taxpayer's total liabilities exceed the fair market value of their assets.

If you exclude COD from taxable income and have tax attributes (which are largely carrying-over losses/credits, and basis in depreciable property), the COD decreases those tax benefits even though the COD isn't classified as taxable income.

[Flamingo]

COD is excluded from being counted as taxable income if: (1) it occurs in a bankruptcy; or, (2) the taxpayer was insolvent; or, (3) it is related to a qualified farm; or, (4) if is related to a qualified real property business; or sometimes, (5) if there is a genuine dispute about the amount of debt owed in the first place.

Therefore, even if you don't file bankruptcy, if you were insolvent, the COD might not be considered as taxable income. Insolvent means that the taxpayer's total liabilities exceed the fair market value of their assets.

The IRS loves debt forgiveness or cancellation because of the taxes it generates. It is not easy to get out of paying those taxes and to claim insolvency will probably require the hiring of a tax professional to get around the taxes. Of course if the amount is included in a bankruptcy filing that same year, there is no problem. The IRS website (irs.gov) has an excellent section on Debt Cancellation with detailed information. Those in foreclosure right now or considering debt foregiveness or debt cancellation should read it in its entirety.

[jaeahr]

thank you for the replies!