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Is there a tax hit for CC lowering your interest rate and closing account?

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    Is there a tax hit for CC lowering your interest rate and closing account?

    Does it still count as having a debt forgiven if the card is just willing to work with you by "lowering your payment" through a lowered interest rate and closing the account for a temporary amount of time?

    #2
    I don't think so. The only time is when a portion of a debt is actually forgiven, if they were to say you only have to pay back 50% of what you owe them. It sounds like your creditor is not offering this, but only offering a reduced monthly payment or lower interest rate, which is not the same thing.

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      #3
      frustrated7 is correct. In debt foregiveness, all or a portion of a debt is forgiven. A 1099 will be sent out by the creditor in the amount of the forgiven debt. The debt services out there that reduce your payment do so by just getting the interest lowered on the amount you owe - the amount you owe does not change but the payment will be less as the interest will probably get dropped dramatically. It can make one heck of a difference in a monthly payment to get it down from 29% to 5% or 6%. There is no forgiven debt involved in this.
      _________________________________________
      Filed 5 Year Chapter 13: April 2002
      Early Buy-Out: April 2006
      Discharge: August 2006

      "A credit card is a snake in your pocket"

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