Here To Be An Asset To You,

Jesse Niesen
DebtGoToGuy.com

Here To Be An Asset To You,

Jesse Niesen
DebtGoToGuy.com

Many people are struggling to pay off credit card debt, medical bills or other unsecured debt and they’re wondering if the debt settlement advertisements on TV, radio or the Internet are for real?

Every day I speak with good people across the US who are financially overwhelmed. Many are unable to make the minimum payments on the credit cards, or on other unsecured debt. Maybe they can’t borrow against their home as property values have plummeted. Maybe they can’t make the payment suggested by credit card counseling agencies, or they simply want to avoid bankruptcy.

People struggling with serious credit card debt often ask:

• Can I really get out of debt for a fraction of the cost and pennies on the dollar?
• Can debt settlement help me get out of debt quickly, legally and safely?
• And what are the effects on my credit rating or my taxes?

As you may imagine, I’m also often asked, “Am I a good candidate for debt settlement?”

For many years helping people all over the US to get out of debt, in general, if you can comfortably pay back your debts on your own by paying more than the minimum payment every month without hardship, then you should continue to do so. It may not impact your credit score and it may be relatively trouble-free. If this is your situation, I recommend an accelerated pay off strategy.

But if you owe over $10,000.00 in unsecured debt and you’re having a financial hardship; maybe you’ve lost your job, your income has been cut, you’re already delinquent on your payments, or maybe you’ve gone through a divorce, have a medical illness or medical expenses and don’t want to or can’t file bankruptcy, then debt settlement from a trusted and time-tested organization is usually the best option.

When is debt settlement NOT an option?

If you’re unsecured debt balances are under $10,000, you can settle your own debts but will not qualify for most settlement programs.

Consumer credit counseling may also be an option. Your payment can be consolidated into just one, and typically interest rates are reduced on your accounts. However, many credit card counseling programs have a very high dropout rate, can last up to 5-7 years and you end up paying back 100% of the debt you owe plus any new interest. Again, that’s why so many find that debt settlement is usually the best option.

If you are unable to pay your minimums or even afford the minimum savings requirements for a legitimate debt settlement program, then you should speak with a bankruptcy attorney.

However, as long as you can afford to save the money needed for settlements, then debt settlement really can allow you to pay back much less than you owe, typically less than half of your balances at the time of settlement.

What’s the final answer?

YES, debt settlement can really allow you to pay off your debt for less than what you owe, typically for 50% or less, allowing you to get out of debt FAST.

Debt settlement is the fastest way to get out of debt for the least amount of money while avoiding bankruptcy.

Here To Be An Asset To You,

Jesse Niesen
DebtGoToGuy.com

If I Settle My Credit Card Debt, How Will These Significant Savings Affect My Taxes?

This is an interesting question when considering how to get out of debt.

In general, the IRS considers $600 or more of debt which is forgiven or discharged as income. This mean if you owe $50,000 in credit card debt and settle it for $20,000, then the $30,000 difference (savings) is taxable as income since it is not repaid. Although it doesn’t always happen, the forgiving creditor must provide the taxpayer with a 1099-C tax form.

However, the IRS will often waive this tax liability if you can show you were insolvent during the time in which your debt settlement took place. To take advantage of this exemption from tax liability due to the discharge (settlement) of debt, file Form 982 with your taxes for the years in which you settle your debts. You can find this form online at irs.gov.

It is highly recommended that you make a quick call to your accountant or tax professional for further discussion. You may be relieved with what they have to say.

What Does “Insolvent” Mean?

Being insolvent means the amount of your debts are greater than your assets (how much money and property you own).

For example, if a taxpayer has $50,000 in debt and owns $30,000 in assets, he/she cannot exclude more than $20,000 of forgiven debt from his/her income tax. Any forgiven debt over $20,000 that year must be reported as taxable income.

EXAMPLE STORY OF DEBT SETTLEMENT TAX AVOIDANCE:

Tom Smith experienced a financial hardship; losing his job for several months and falling behind with his creditors. When he resumed working, his new job could only offer him a reduced income. After falling behind, Tom’s interest rates on his credit card debt jumped up to an average over 20%. His minimum payments jumped up as well and he was no longer to keep up even after he began working again.

Tom was able to avoid declaring bankruptcy by reaching an agreement with his creditors, whereby they agreed to forgive $20,000 of the total he owed them.

At the time of the debt settlement, Tom’s liabilities totaled $120,000 and the fair market value of his assets was $100,000. At the time Tom settled his debt, he was considered insolvent by $20,000. So Tom was able to exclude the entire $20,000 of credit card debt that forgiven from his taxable income because it was not more than the amount by which he was insolvent.

What’s the Bottom Line on Paying Taxes for the Money You Save from Debt Settlement?

To the degree you are insolvent (your debts are greater than assets) at the time your debt is settled, you can be exempt from income tax due to the forgiveness or discharge (settlement) of credit card or unsecured debt by filing IRS Form 982 along with your taxes. However, the IRS adds “you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent.”

Additional Resource: http://www.irs.gov/pub/irs-pdf/p908.pdf

There are always very clear and real responsibilities when dealing with credit card debt, especially when you don’t pay back 100% of what you owe through debt settlement. However, once you can remove your credit card debt problem from your life, a whole new world of opportunity can open up for you as you finally become debt free.

Here To Be An Asset To You,

Jesse Niesen
DebtGoToGuy.com

Debt settlement is a legal agreement between a debtor and a creditor where a portion of the debtor’s debt is simply “forgiven.”  Debt settlement is actually the best way for creditors (credit card companies, banks and debt collectors) to get the most money from consumers in financial hardship, which is why debt settlement works so well.

Debt settlement is the fastest way to get out of debt for the lowest monthly cost and the biggest total savings while avoiding bankruptcy.

But is Debt Settlement Morally Wrong? (more…)

ATTORNEY GENERAL CUOMO ANNOUNCES NATIONWIDE INVESTIGATION INTO DEBT SETTLEMENT INDUSTRY

Subpoenas Fourteen Debt Settlement Companies and One Law Firm in Connection with Probe

Debt Settlement Companies Often Charge Huge Fees for Misleading Plans, Suggest Selling Blood Plasma to Raise Funds, and Leave Consumers in Worse Financial ShapeNEW YORK, NY (May 7, 2009) – Attorney General Andrew M. Cuomo today announced a nationwide investigation into the debt settlement industry, subpoenaing fourteen debt settlement companies and one law firm. Companies in the debt settlement industry often prey upon consumers who find themselves unable to keep up with credit card payments during these difficult economic times.“Today, millions of hardworking Americans are finding themselves imprisoned by debt. In response, a rogue industry has stepped in, offering consumers false hope, charging tremendous fees, and leaving them in a worse financial situation,” said Attorney General Cuomo. “Our mission is clear: to hold unscrupulous businesses accountable; to rein in a renegade industry; and to ensure that people are not victimized when faced with financial hardship.”

As part of his broad investigation of the debt settlement industry, Cuomo today issued subpoenas to fourteen debt settlement companies and one law firm: American Debt Foundation, Inc.; American Financial Service; Consumer Debt Solutions; Credit Answers, LLC; Debt Remedy Solutions, LLC; Debt Settlement America; Debt Settlement USA; Debtmerica Relief; DMB Financial, LLC; Freedom Debt Relief; New Era Debt Solutions; New Horizons Debt Relief Inc.; Preferred Financial Services, Inc.; U.S. Financial Management Inc. (d.b.a. My Debt Negotiation); and the Allegro Law Firm.

The subpoenas include requests designed to uncover the companies’ fee structures, how many people have benefitted from the companies’ services, and what kind of relief the companies are actually providing.

Cuomo is also currently investigating Nationwide Asset Services, Inc., based in Phoenix, Arizona, and Credit Solutions of America, Inc., based in Addison, Texas.

The debt settlement plans offered by these companies are often inherently flawed and, based upon consumer complaints, it appears that many consumers are being misled regarding the nature of the services offered by these companies. For example, some companies falsely represent that they can reduce consumers’ credit card debt by as much as 75 percent through negotiations with creditors. In addition, the companies often take their fees up front and keep their fees even when they do not provide the promised services.

The debt settlement plans are generally premised on consumers aggregating savings, over one to three years, from which both the payment of the company’s fees and any negotiated settlement are to be made. Yet most consumers who are targeted by these companies are unable to meet the savings requirements because of their precarious financial situation.

Some of the companies also urge consumers to seek additional sources of funds through means such as selling their blood plasma, mowing lawns, cutting down on car insurance, and borrowing from their neighbors and church. Even for those consumers who can meet the requirements set out by a plan, their amount of aggregated savings is ordinarily insufficient to settle their debts. As a result, many consumers find themselves worse off financially because of these debt settlement plans.

Many consumers may benefit more from working directly with their creditors, seeking credit counseling, or consulting an attorney about filing for bankruptcy. Additionally, even when enrolled in a debt settlement plan, consumers are often still subjected to collection efforts and lawsuits filed by their creditors. Consumers are even told not to discuss their debt situation with creditors.

Attorney General Cuomo has actively pursued unscrupulous companies and individuals that have attempted to take advantage of people who are experiencing personal financial problems during these trying economic times. On April 14, 2009, the Attorney General arrested the owner of Long Island-based American Legal Process for allegedly providing “sewer service” to thousands of New Yorkers owing debt. According to the Attorney General’s criminal complaint and civil suit, this company failed to properly notify individuals that they faced debt-related lawsuits. As a result, individuals would unknowingly default and have judgments entered against them, without the chance to defend themselves.

Consumers who believe they are being defrauded by a debt settlement company are urged to contact the Attorney General’s office at 800-771-7755 or www.oag.state.ny.us.

The Attorney General’s investigation of the debt settlement industry is being spearheaded by the Bureau of Consumer Frauds and Protection in New York City and several of the Attorney General’s Regional Offices across the state, under the supervision of Consumer Frauds Bureau Chief Joy Feigenbaum and Deputy Attorney General for Regional Affairs David Sampson.

The following are some helpful information tips for consumers faced with significant credit card debt:

• Be wary of debt settlement companies which falsely promise to obtain substantial lump sum debt reduction settlements. Many advertise “reduce debt now,” and claim as much as 50% to 75% off credit card debt, but rarely obtain advertised reductions.
• Never agree to sign a contract with a debt settlement company that requires payment in advance prior to obtaining the promised debt reduction.
• Enrollment in debt settlement plans may not stop creditors from bringing collection law suits, or prevent enrolled accounts from growing larger by the addition of late fees, interest, and penalties. Also, credit reports will reflect derogatory information, including assessed late charges and non-payment of debt, and consequently credit scores will be adversely affected.
• Creditors are under no legal obligation to accept a settlement offer for less than the outstanding balance owed.
• Only a small number of consumers who enroll in debt settlement plans have the financial means to complete them. Usually, they drop out after having paid service fees to the companies with no settlements.
• Enrollment in a debt settlement plan premised on stopping payments to creditors will likely lead to more frequent and aggressive creditor collection efforts often resulting in judgments, wage garnishments, and freezing of bank accounts.
• Check with the Better Business Bureau to obtain a Reliability Report on a particular debt settlement company and its rating.
• A wise first step to help resolve an outstanding account is to speak directly to the credit card issuer. Alternatively, it may be helpful to speak to an attorney or an accredited credit counselor who can help develop a plan of action that best works for each consumer’s unique situation.

From: Office of Attorney General of New York

MY RESPONSE:

There is no question about two things:

#1) Debt settlement is a legal, ethical, moral and viable option for people in a financial hardship to get out of debt for the lowest total cost in the shortest possible time frame without filing bankruptcy.

#2) Many unscrupulous operators have been taking advantage of consumers in the debt settlement industry for years.

What’s misleading in the Attorney General’s statements is the tone that all debt settlement programs are scams, demonizing the debt settlement industry while upholding credit counseling and bankruptcy as somehow more reputable.

This is not the case at all.

Credit counseling is backed and supported by the credit card companies themselves. These programs are notorious for higher failure rates that debt settlement. They often tell a half-truth that enrolling will not affect a person’s credit rating, yet hide the fact that while enrolled such debt management programs negatively affect a person’s credit report and credit “worthiness” as bad or even worse than a bankruptcy.  This is why many lenders call it a “walking bankruptcy” when they see “THIS ACCOUNT IS INCLUDED IN CONSUMER CREDIT COUNSELING SERVICES” or similar entries on a consumers credit report.

Bankruptcy attorney’s have had a hard time qualifying consumers for chapter 7 since the “creditor friendly” Bankruptcy Reform Act was passed in October 2005, which caused an 80% drop in bankruptcy filings the following year. Since then, the most common stories I hear from clients is the “bait and switch”… where bankruptcy attorney’s get a person’s hopes up to qualify for Chapter 7 but then switch to the Chapter 13.  In Chapter 13, the consumer repays a portion of their debt, sometimes even more than they would pay through debt settlement or even more than they currently owe.     The payments are made during an average of five years on a court-ordered payment plan. This causes a total of 12 years of devastating credit damage.

So to generalize and say debt settlement is all bad and consumers should talk to a credit counselor or bankruptcy attorney is plain bad advice.  I’m afraid the “black and white” nature of the NY Attorney General’s statement will lead consumers to make even more poor financial choices, causing subsequent financial nightmares that could have been avoided…

In my experience with thousands of clients over the past seven+ years, I’ve seen a LARGE NUMBER of people, first hand (including my own friends and family), successfully save more money through debt settlement than ANY other option available.

The majority of my clients agree they receive greater benefit from enrolling in their debt settlement programs than they pay in fees. Why else would they send me e-mails and testimonials months and YEARS later? Why else would they continue to refer their friends and family to me?

I have new clients this week who were referred to me by happy clients I helped YEARS ago. In fact, referrals from past clients are a significant portion of my business. I think that says a lot about the fact that debt settlement is a legitimate option and how it can, has and will help many consumers who are struggling with significant debt to be debt free ASAP for the lowest cost without filing bankruptcy.

When you account for the fact than most people enrolling in debt settlement programs are already paying 20-30% interest PER YEAR, even the flat 15% fees most debt settlement companies charge is a bargain.  Furthermore, the debt settlement companies I work with track their results and report them internally.  For years we’ve seen clients accounts settled in full for an average of 40-50% of their balances.  So in essence, the consumer is still SAVING significant money, paying less per month and less overall to get out of debt much faster than any other available option other than bankruptcy (which, again, many people simply do not qualify for).

Sure, there are debt settlement horror stories caused by ignorant, greedy, untrained salespeople enrolling consumers in bad debt settlement programs.  Some of  these companies  are not even set up to fulfill their promises to settle debts for significant client savings. This doesn’t mean the whole industry is a scam. Far from it.

What we need is the BBB to do its job to help consumers distinguish the good companies from the bad.

Currently, the BBB is revoking membership and giving “D” and “F” ratings to any company in the debt settlement industry, regardless of their track record or number of complaints.

This is despite the fact that there are solid, ethical players providing a real, valuable debt settlement service to consumers.

To illustrate this, look at FreedomDebt.com, a company  who has helped thousands upon thousands of clients with debt settlement nationwide since 2002, yet has only one single BBB complaint in its entire history.

The company was a paying member of the BBB until last year when it’s membership was revoked and it was given a “D” rating. Admittedly from the BBB this is only because of the industry the company is in and has no reflection on service to its clients. The company maintains an outstanding reputation with clients and has been continually invited back to talk shows and news programs all over the country.

http://austin.bbb.org/WWWRoot/Report.aspx?site=40&bbb=0825&firm=90006140

Now for some contrast…

Take a look at Credit Solutions (creditsolutions.com), who’s looong list of BBB complaints is currently at 1,682!

I’ve personally spoken with many consumers over the years who report ridiculous, unrealistically low estimates and quotes from the company’s sales people who use high pressure tactics to enroll as many new clients as possible without taking any time to disclose the truth about the programs.

Here’s what happens when you try to short-cut this important financial decision:

http://www.bbb.org/dallas/business-reviews/debt-reduction/credit-solutions-in-richardson-tx-90005445

But what’s the root of the problem?

Lack of education.

Lack of “financial education”, specifically…

It takes time to learn all this “credit and debt stuff,” and most of us were never even taught the basics in school.

For sales people on a commission, it simply takes too long to educate a client completely in order for them to make their most financially intelligent choice.

What consumers need is unbiased, complete education about credit, their options to get out of debt and how, exactly, to make the best choice for themselves.

There is no cookie cutter approach.

Consumers must take responsibility for their own financial education.

Hopefully this investigation sheds light on our need for accurate financial education and validates debt settlement as the legal, ethical and moral option it IS… for consumers to be debt free ASAP and save the most money possible without filing bankruptcy.

Hopefully it also removes the unscrupulous players from the industry who have become the bad apples in the barrel.

One last thing…

It seems the competition of debt settlement programs (i.e. credit card companies, credit counseling and bankruptcy attorneys, even “do it yourself” debt settlement plans) have all ganged up on this “upfront fee” issue.  It may sound good, but let’s think about it ourselves, shall we?

The advice above states:

“Never agree to sign a contract with a debt settlement company that requires payment in advance prior to obtaining the promised debt reduction.”

This would include all professional debt settlement services.

Reality: No one works for free.

Every credit counseling program (even the remaining so-called “non-profits” left over after the IRS revoked over half of the credit counseling industry’s non-profit status in the past few years), bankruptcy attorneys and even the DIY debt settlement folks REQUIRE you to pay them up front before they provide their services or products.  So what’s the difference here?

No BK attorney will file your case for free.  Credit counselors are not free, they too charge fees, and when they receive a payment from you they get a kick-back from your creditors.

It’s ridiculous to think a company would only get paid its fee at the time a settlement happens. That said, there are many horrible fee structures out there that need to be addressed.

Unfortunately, the news I’m seeing about this investigation is only going to cause more confusion, more fear and ultimately lead more consumers to financial ruin BECAUSE every day, 24/7/365, people in America with significant amounts of high interest credit card debt are LOSING MONEY.

It only gets worse if they wait, and sending them to Credit Counseling or Bankruptcy is sending them to another den of wolves.

The beginning of a better option

If you’re in debt, I offer a free “life-changing financial education” program that provides a free debt analysis comparing all options, budgeting guide and audios, videos and workbooks to teach you what you must know before you pay anyone… about how credit works, your options to get out of debt and how to make this critical decision for your financial future. Ultimately, you must make “getting out of debt ASAP” a PRIORITY, get educated, make your best choice and TAKE ACTION to actually be debt free ASAP.

I like to call it “the big idea”…

STOP Paying Interest and START Earning Interest ASAP!

Hope this clears up some of the muck, and good luck!

Was this valuable to you?  Feedback?  Question(s)?

Please share your thoughts and ideas below.  I respond to any questions posted as a comment in detail by email.

Thank you for the opportunity to serve you!

Here To Be An Asset To You,

Jesse Niesen
DebtGoToGuy.com

Debt settlement, also known as debt negotiation, debt arbitration or debt workout, is an aggressive approach to debt reduction in which the creditor agrees on a reduced amount, paid by debtor, as payment in full.

As long as consumers continue to make minimum monthly payments, creditors will not negotiate a reduced balance. However, when payments stop, balances continue to grow because of late fees and ongoing interest, and creditors then become willing to settle for less than the balance owed.

Consumers can arrange their own settlements by using advice found on web sites, hiring lawyers to act for them, or using debt settlement companies. Some settlement companies may charge a large fee up front. Some take a monthly fee from customer bank accounts for their service, possibly reducing the incentive to settle with creditors quickly. One expert advises consumers to look for companies that charge only after a settlement is made, and charge about 20 percent of the amount by which the outstanding balance is reduced.

History

As a concept, lenders have been practicing debt settlement thousands of years. However, the business of debt settlement became prominent in America during the late 1980s and early 1990s. Bank deregulation, which loosened consumer lending practices, followed by an economic recession placed consumers in financial hardships. With charge-offs (debts written-off by banks) increasing, banks established debt settlement departments.  These departments were staffed by personnel who were authorized to negotiate with defaulted cardholders.  The purpose was to reduce the outstanding balances to recover funds that would otherwise be lost if the cardholder filed for Chapter 7 bankruptcy.

Typical settlements ranged between 25% and 65% of the outstanding balance.

Alongside the unprecedented spike in personal debt loads, there has been another rather significant (even if criminally under reported) change – the 2005 passage of legislation that dramatically worsened the chances for average Americans to claim Chapter 7 bankruptcy protection. As things stand, should anyone filing for bankruptcy fail to meet the Internal Revenue Service regulated ‘means test’, they would instead be shelved into the Chapter 13 debt restructuring plan. Essentially, Chapter 13 bankruptcies simply tell borrowers that they must pay back some or all of their debts to all unsecured lenders. Repayments under Chapter 13 can range from 1% to 100% of the amounts owed to unsecured creditors, based on the ability of the debtor to pay. Repayment periods are 3 years (for those who earn below the median income) or 5 years (for those above), under court mandated budgets that follow IRS guidelines, and the penalties for failure are more severe.

How it works

Essentially, the debt settlement company negotiates on the borrowers’ behalf with creditors. They reduce the overall debts in exchange for an agreement for  regular payments to be made. Only credit card debts can be handled, not student loans, auto financing or mortgages. For the debtor, this makes obvious sense – they avoid the stigma and intrusive court-mandated controls of bankruptcy while still lowering, sometimes by more than 50%, their debt balances. Whereas, for the creditor, they regain trust that the borrower intends to pay back what he can of the loans and not file bankruptcy (in which case, the creditor risks losing all monies owed.)

There are obvious drawbacks – credit reports will show evidence of debt settlements and the associated FICO scores will be lowered as a result. There’s always the possibility of lawsuit whenever debts lay unpaid.

Few creditors wish to push borrowers toward bankruptcy and the potential of governmental protection against all debts. In addition, the specific debts of the borrowers themselves affect the success of negotiations.

Tax liens or domestic judgments remain unaffected by attempts at settlement for reasons that should be clear.

Student loans, even those not federally subsidized, have been granted special powers by recent legislation to attach bank accounts without possibility of Chapter 7 bankruptcy protection. Also, some individual creditors, including Discover Card, for example, tend to have an aggressive resistance against negotiations.

Debt Settlement Companies

In order to work with a debt settlement company, a consumer needs lump sum cash (best scenario), or to build up enough funds over a pre-determined period of time. Once enough funds are built up, the negotiation process can begin with each creditor individually. The account can be held by credit card companies or may be sold to a collection agency for an average of $0.034 on the dollar (2007), in which case debt can still be negotiated. The debt settlement company negotiates with the credit card companies for 35% – 50% of the existing balances.

The debt settlement companies typically have built up a relationship during their normal business practices with the credit card companies and can come to a settlement agreement quickly. Once the consumer pays the agreed upon amount, the debt settlement companies take a percentage of the savings of the forgiven debt as the fee.

With the current economic crisis, more and more credit card companies may be willing to settle existing credit card debts rather add to their already large written-off bad debt.

Creditor’s incentives

The creditor’s primary incentive is to recover funds.  If the debtor files for bankruptcy, the creditor can potentially lose the entire amount. The other key incentive is that the creditor can often recover more funds than through other collection methods. Collection agencies and collection attorneys charge commissions as high as 40% on recovered funds. Bad debt purchasers buy portfolios of delinquent debts from creditors who give up on internal collection efforts and these bad debt purchasers only pay between 1 and 7 cents on the dollar. So the creditor typically recovers more in a debt settlement agreement than they would with attorneys or bad debt purchasers.

Common objections to settlement

There are five main objections to consumer debt settlement: damaged credit, increased collection calls, possibility of lawsuits, tax consequences and the need to settle with all creditors.

Settlement damages credit

The debt settlement damages the scores in credit report. A credit report is used by creditors to judge past credit performance to see if the applicant meet their criteria for lending. Insurance companies use a person’s credit report to determine premiums and prospective employers review the credit report to establish the character of a job candidate.

Debtors can still be sued

A debt settlement company does not make monthly payments on the debtor’s accounts and they still remain in default. While the debts are still in default the creditor or its assignee can still file a lawsuit against a debtor. Most creditors and debt collectors want a lump sum payment to settle for less than the full debt.

Although a debtor may make monthly payments to the debt settlement company, the amount is too small to successfully negotiate a settlement until after the debtor has made several months’ worth of payments.

Tax consequences

Another common objection to debt settlement is that debtors whose debts are partially canceled outside the bankruptcy system will need to report the canceled portion of the debt as taxable income. (IRS Publication Form 982)

The IRS considers $600 or more of forgiven debt as taxable income. The forgiving creditor must provide the taxpayer with a 1099-C tax form. This form will list the amount of forgiven debt and interest in Box 2. Taxpayers with portions of personal loans forgiven may not subtract the interest reported in Box 3 from the amount of reportable income on this form.

However, the IRS does not require taxpayers to report forgiven debt if the tax payer was insolvent at the time the creditor forgave the debt. Being insolvent means that the amount of a debtor’s debts are greater than his/her assets (how much money and property the debtor owns). However, the IRS adds that “you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent.”

For example, if a taxpayer is $10,000 in debt and owns $3,000 in assets, he/she cannot exclude more than $7,000 of forgiven debt from his/her income tax. Any forgiven debt over $7,000 that year must be reported as taxable income.

Was this valuable to you?  Feedback?  Question(s)?

Please share your thoughts and ideas below.  I respond to any questions posted as a comment in detail by email.

Thank you for the opportunity to serve you!

Here To Be An Asset To You,

Jesse Niesen
DebtGoToGuy.com