Debt settlement question

[95kindebt]

If we go the debt settlement route, does the CC have to be charged off to a collection agency, or will the original credit grantor entertain the idea of settling for a fraction of what we owe?

Anyone know?

Thanks in advance.

[landofpoor]

no you wont have to wait for it to pass to collections .I was offered settlements once it got to around 4 months and beyond. chase first offered 80% then month later it was 45% i believe then it was offered again at 25%.they were all offered before being charged off.Once to collections I also had think it was 30% settlement before sent off to the next ca then no offers from new ones.

[95kindebt]

thanks.

[LimpDisc]

We didn't pay our Wells Fargo Visa due on August 28, 2009 and we got a settlement offer for 70% on September 04, 2009. We were stunned at how quickly we got that offer. We had a perfect payment record with them.

[klandsb]

Plus any difference in the settlement offer has to be reported as INCOME at the end of the year.... Say u owe $10,000 settle for $ 5,000 then u hve to add the other $ 5000 as income for that year... I forget the form # u receive but Uncle Sam wants his share

[klandsb]

Old Debt Settlements Can Come Back to Haunt with Large Tax Bite

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There always seems to be this heated debate on this forum over the issuance of a 1099-C for a debt settlement. There are two things I learned reading this article that are a bit alarming. One is the issuer has up to THREE years to issue the 1099-C and when the 1099-C is ISSUED (not when the debt is settled or forgiven) is when your status of being insolvent is applied.

So, in the case of "bad timing" you could settle a debt, three years later get a 1099-C and then it would be determined if you were insolvent. Now the IRS did clarify some of the 1099-C reporting requirements for 2009 but I don't think this changed, but I could be wrong, I was unable to find anything to dispute this article.

Q. I settled a debt in 2007 for less than owed, paying $15,000 on a $22,000 debt. I just today received a $7000 1099c for tax year 2007 from the creditor in the mail. Does this actually mean that I have to amend my tax return for 2007?

A. A 1099c is a tax form issued as a result of cancellation of debt. The amount of forgiven debt will count as income. According to the IRS regulations, a creditor has up to 3 years after the last ” collection activity” to issue a 1099c. You, of course, are responsible for paying taxes in the year in which that activity occurred. So, if the creditor stopped trying to collect 3 years ago, they can issue you a 1099c for 2005, on which you’ll not only owe taxes, but penalty and interest (16%). If they sell the debt to a junk debt buyer (JDB), then it becomes the JDB’s responsibility.

Some “debt fixers” claim that all you have to do is file for “insolvency” an the IRS will look the other way. The bad news is, you have to be insolvent at the time the 1099c is issued…not when the debt was “forgiven”.

If the amount of this debt was sizable, you might want to think about calling the creditor (the credit card company) and demanding your 1099c so you can get the tax accounting right.

Actually, the above situation is rare (lucky you for being so singled out)! Most of the time if you settle your debt with credit card companies, they will issue a 1099c right away. What is even more rare is a collection agency or JDB issuing a 1099c.

http://www.creditinfocenter.com/wordpress/?p=225

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I started with nothing... and have most of it left.

[optimistic1]

Just file a bk.