Amex 30% settlement offer Plus 2 years to Pay

[keepsmiling]

Not going for it, but thought others might like to know. The question does come up from time to time.
I guess they know there's nothing in the well.

[CCM620]

I had Chase offer like a $3,400 settlement in 3 payments for a $23,000 cc debt. I was tempted, but that would just cause my other 6 defaulted cards to get back into the game and pursue me harder. If you can't settle with most or all, don't know what the point would be to settle with one, although its a sweet deal.

[Flamingo]

And you would receive a 1099 for the forgiven portion of the debt that has to go on your tax return as income for the year in which the debt is forgiven. Would have been $19,600 for the last poster. If one chooses debt settlement, read all paperwork before signing. Have an attorney review also.

[CCM620]

Wouldn't matter. If you are insolvant (more debt than assets) the forgiven debt amount is not included as income.

[Flamingo]

Wouldn't matter. If you are insolvant (more debt than assets) the forgiven debt amount is not included as income.

Proving insolvency with the IRS is an entirely different ballgame. It also is a big red flag for an audit.

[HHM]

Proving insolvency with the IRS is an entirely different ballgame. It also is a big red flag for an audit.

Very true.

Keep in mind, it is not that you are just insolvent; The IRS looks to the degree of insolvency.

So, let's say that you have $50,000 of forgiven debt income. You do the insolvency worksheet and you are only $10,000 insolvent (total FMV of asset - total liabilities immediately before cancellation of debt). You only get to deduct $10K, you still would pay tax on the other $40K.

[treehugger1]

The tax accountants I spoke with said to simply submit my 982 insolvency form and worksheet along with my taxes. You are not required to submit the worksheet, but the irs does not want to spend any more money than necessary chasing after money that does not exist. I was advised to make the insolvency clear.

There seem to be a great deal of disagreement about how insolvency draws attention from the irs. From what I learned from accountants who have insolvent clients and 1099 debt forgiveness, you simply need to cross all your t's and dot all your i's. Having done so, an audit is just a bit of additional paper work. But, with so much insolvency and debt forgiveness the past few years, the irs is probably not blind.

If you are looking into insolvency, you do need to consider all values of retirement funds and pension values. Consideration varies depending upon how these are set up. You might need help to sort this out.

I am insolvent under the irs rules and received my first debt cancellation 1099's. I will let folks know if I am audited.

I'm no expert. I'm just gaining personal experience. Your mileage may, and probably will, vary.

[AngelinaCatHub]

IF you are bk meat, settlement on any debt would certainly be foolish. It would throw a wrench into the bk gears as preferential. One card, Sears I believe wanted to settle over a weekend. HAD to be NOW. When I told the guy that my lawyers office is not open, he said it would be off after Sunday so settle today. I told him to fax me the paperwork. I was so dumb about bk, yet I felt a gut feeling to avoid them. Now I know the tricks on settlement. Once one card settles, and your bk gets stuck or dismissed the other vultures can hit on you with suits. 'Hub

[OhioFiler]

If they've offered 30% that means their bottom is lower. Counter-offer 15%.

[HHM]

If they've offered 30% that means their bottom is lower. Counter-offer 15%.

Maybe, but you will probably lose the payment plan option for anything lower, will need lump sum.

[keepsmiling]

If this wouldn't screw me royally I'd consider it. If they'd all settle for 10-15% at once, maybe I'd consider it BUT:
I have a 401k. So I'd have to pay taxes on the money I'd take out to pay it with AND the forgiven amounts (somewhere around 80-90K) AND
I'd probably lose my kid's scholarship if I had to count all that as income.

We'll get around to filing one day. There is no rush at the moment. We'd have to stop eating for a few months to come up with the money for the attorney. I can't give up my house as we can't rent for less unless we find a shack. One day some regular income will come in and we will be in better position to file.

Just mentioning it cuz I thought it was decent offer for anyone in a position to accept it, especially from Amex.
I've had other pretty good offers as well, but this is the best one they have come up with.

It may give others looking to settle some hope.

[tobee43]

i beg to differ with my very knowledgeable forum participants, however, it is not difficult to prove to the IRS that one is insolvent IF you did not file bankruptcy, provided you were. of course, if you did or have filed your bankruptcy will cover any 1099C you receive. again, it's really the only way the creditor has to notify the government of the loss they are going to claim. i'm not saying it's impossible that one may have to pay taxes on a gain of some sort.

i have to chuckle about audits i have worked on ones that the IRS claimed the person forgot to list a W2 which was a attached and listed on page 1. i have seen the IRS audit for incorrect spellings of a name and THEY (the IRS) are the one's that misspelled the names. so anything can trigger an audit.

at first when all these 1099C starting coming out more commonly in the past 3-4 years people really began to panic, but they have been around for ever and i have yet to see a tax liability, even prior to the federal debt relief act. so we shall see.

i would like a person to post that actually did undergo an audit as a result of a 1099C and what the results were from the audit. we most certainly could all learn volumes about the situation via an actual experience. but for now, i have to believe my own eyes and i have seen none. (keeping in mind much of my past legal work was not just "research" but a large part was tax research). and, again, i do not discount anything can't happen

[LadyInTheRed]

Something else to keep in mind about insolvency. To exclude the forgiven amount from income, you must be insolvent immediately before the debt is foregiven. So, you may be insolvent when you settle one debt, but if you settle a second debt the next day, you may no longer be insovlent since you no longer owe on the first debt.

[OhioFiler]

The IRS isn't interested in small potatoes. They aren't going to audit most people who are claiming insolvency to offset credit writeoffs. I'd say your risk of audit is less than 1/100th of a percent.

[Flamingo]

The IRS isn't interested in small potatoes. They aren't going to audit most people who are claiming insolvency to offset credit writeoffs. I'd say your risk of audit is less than 1/100th of a percent.

It's nice to make blanket statements but when some things are done during the tax filing process, and claiming insolvency is one or more of them and there are 1099's involved, the red flags are waiving. It doesn't matter what the economy is or who is getting them and who is not. If one wants to take settlements on debt and not file BK, consult at that time with a tax professional and if you go through with it, have your taxes professionally done.