Credit Card settlement

[momxx5]

Dear OP,
I am sorry for what you are going through. We are going through very similar circumstances. I am desparately looking for work and DH took a huge pay cut, and our insurance expenses have gone up. All that equals a huge decrease in monthly income. We are now looking at settlements and debating bankruptcy.

Anyone looking into bankruptcy is in dire conditions. There maybe a few people who do it and take it lightly. I have spent weeks of sleepless nights full of worry.

It is true that you will have to claim the unpaid amounts as income, which I guess is the governments way of penalizing....to make those who are trashing feel better....nothing is free. The settlement is really something to look at as far as getting your self back on track.

Lots of luck to you.


PS - while I'm here, does an employer have to know or do they find out if you are currently going thru bankruptcy?

 

[willis37862]

But for the grace of God, go I.

Just what I was thinking.

No advice to the OP as I have never done a credit debt buyout. But good luck to you and your family.

 

[scribega]

Thank you for the encouraging words from everyone and for the feedback.

a1tinkfans: I understand I am responsible for these debts and not once asked for settlement. We have been using the Dave Ramsey method of paying for house, food and clothing and essentials and then drawing a line for the remainder. Since the financial trouble began I have dealt with a lot of companies, many have been helpful and I am currently in deferment with two companies. When I spoke to BoA two months ago when I first became behind I talked to several people at the company and twice was told to talk to a debt management company. I did not want to do that. I have been paying BofA some kind of payment each month. BofA called me today and offered up the settlment.

 

[2Monkeys]

PS - while I'm here, does an employer have to know or do they find out if you are currently going thru bankruptcy?

If they want a credit report, they will find out. Many companies require a credit report when they are seriously considering you for a job, particularly a financial company (i.e. banks, mortgage co, investment co, etc). They will probably not ask for it unless they are planning to hire you, but if it comes back with a bankruptcy, you may not get the job.

To the OP - we have been in your shoes, and I am so sorry for the circumstances you are in. We had a lot of debt when my husband lost his job 7 years ago (right after 9.11). Thankfully, by the grace of God, we were able to get by for 9 months without affecting our credit, but have now drastically changed our spending habits.

You may want to consult a tax advisor on the tax implications of having to declare the $17.7k as income. That may hurt you in the long run, and you definitely don't want to owe the Feds money - they can garnish your wages. Good luck to you.

 

[SarahKate]

OMG people can get so nasty on these boards.

OP, you have gotten a lot of very positive feedback, just IGNORE the ones that have nothing better to do than judge others when you're just asking a simple question.

My mom died in 2003. Not long after, my dad found out that she had accumulated about 40k in various types of debt - most of it he had NO idea about. She was always home and ALWAYS got the mail. She didn't buy extravagant things. She was doing what she felt she needed to do at the time and it all built up - doctor bills, cash advances to her brother, stuff like that. She was the type to not ask for help, so she kept it from us.

But the bad part is she used my dad as a co-applicant, which he also didn't know about.

So he was liable for the debt. Luckily a really big chunk was settled and the remaining amount he paid off.

But the following year dad got the "royal treatment" and had to pay about 5k in taxes from the settlement. Ugh.

I don't really have any good advice for you, just wanted to share our experience. Best of luck!

 

[Floridagal23]

You will have discharge of indebtedness income in the amount of the debt they forgive. You need to calculate next year's taxes to see if this will bump you up to the next bracket and if it is cost effective for you to do this.

 

[wall*e2008]

If the OP could not even make the minimum payment how is the OP going to come up with $6300 today and the tax on the $17700 by next April? Should start making payments now or they may get hit with a penalty and interest for underpaying thier taxes.

 

[a1tinkfans]

Thank you for the encouraging words from everyone and for the feedback.

a1tinkfans: I understand I am responsible for these debts and not once asked for settlement. We have been using the Dave Ramsey method of paying for house, food and clothing and essentials and then drawing a line for the remainder. Since the financial trouble began I have dealt with a lot of companies, many have been helpful and I am currently in deferment with two companies. When I spoke to BoA two months ago when I first became behind I talked to several people at the company and twice was told to talk to a debt management company. I did not want to do that. I have been paying BofA some kind of payment each month. BofA called me today and offered up the settlment.

Since I seem to have "started" something, I feel it is right for me to AGAIN say, I hope that they CAN get help.

I want to take this opportunity to APOLOGIZE to the OP (not to the people that went CRAZY, LOL) if the post sounded overly harsh.
I guess I felt it was fair to say MY opinion, since it was posted. I still do feel we are responsible for our own accrued debt and as a patron of That bank, taking that settlement DOES affect my business/family. My angst is with the bank too.
I do understand and wish the best in this difficult situation (as I stated twice) but I guess that got overlooked in my zeal to explain that many live above their means and when walking away from ANY debt, it really does impact the rest of the nation.
AGAIN, I DO hope it works out for you.

 

[wdwmaw]

But for the grace of God, go I.

Thank you for your words. I also do not have any advice. We have 2 trips planned this year, free dining and a free room thanks to LMT. My DH works for auto industry and we find out this week about layoffs. His income had been cut of overtime ($30,000) and with all the cuts in our comunity my job with the school may not exist next year. I will not take my ticker down till the last minute, but we all must remember the OP's position is not ours and not ours to judge.

The credit card companies got there bailout and they have bleed the middle class and continue to do so with there billing practices. One late payment and they can up your APR, triple your payment, and charge as much in late fees and your payment.At this time in our lives we all need to be there for each other

 

[wall*e2008]

Thank you for your words. I also do not have any advice. We have 2 trips planned this year, free dining and a free room thanks to LMT. My DH works for auto industry and we find out this week about layoffs. His income had been cut of overtime ($30,000) and with all the cuts in our comunity my job with the school may not exist next year. I will not take my ticker down till the last minute, but we all must remember the OP's position is not ours and not ours to judge.

The credit card companies got there bailout and they have bleed the middle class and continue to do so with there billing practices. One late payment and they can up your APR, triple your payment, and charge as much in late fees and your payment.At this time in our lives we all need to be there for each other

You better check into this before you use the room. If LMT is claiming the rack rate for the room and considered it a contest you will be obligated to pay the tax on the free room.

 

[ilovefh]

Yes you do have to claim the written off amount on your taxes, (you will get a 1099-c cancellation of debt) BUT, you can claim insolvent on that amount if you debt is greater than your assets.

I have a question about this. My friend is going through a debt settlement company so her debts will eventually be settled. She doesn't have any assets. What does claiming insolvent on the amount mean? We just had the taxes conversation in the car the other day.

 

[spaceykiddette]

I agree!! These days, people aren't getting laid off or fired for not doing a good job, the companies just can't have as many employees or are going under all together. It doesn't sound to me like OP was neglecting the responsibilities by spending all they make on going shopping and out to dinner... the income's not there!!! Just how do you think that's his fault??? It sounds to me like he's trying all he can!! I'm sure when he charged on the card he wasn't thinking "hmmm... let me charge this up so the rest of the US citizens can pay it off for me"!!

The perhaps they shouldn't put that much money on a CC card to begin with. Of course it is their fault!!!!!!!!!!! Who else's fault could it be? If they have $6000 they could have been paying a great deal more than below minimal payments.

 

[girli565]

I'd do it! I know that's not the popular opinion here but in these hard times I would jump on it if I had the amount they want.

Everyone here is right that the difference will be taxable income but I think it's worth it. Don't worry about your credit score too much, I settled two cards 2 years ago and since the settlement my score went from 615 to 750 as of yesterday. Not too shabby!

 

[pilesoflaundry]

If the OP could not even make the minimum payment how is the OP going to come up with $6300 today and the tax on the $17700 by next April? Should start making payments now or they may get hit with a penalty and interest for underpaying thier taxes.

The only thing with making payments now as scheduled is you get no where if you can only afford the minimum or in this case not even the minimum. Once the debt amount is that high or you have been late at all the interest is outrageous.

I tried that for a long time on a card that got out of control (not my fault, not going to go there on a message board but someone else cosigned me without my permission or knowledge). After a year of making payments, my balance was exactly the same. I could have taken the settlement, put away the excess I threw away basically in a year's worth of payments and paid the feds what I would have owed.

Make sure it's in writing and it says settlement is considered paid in full. Make sure they haven't sold the debt to anyone else yet. I had that problem. I had a debt switched around. I did get a paid in full letter and it showed up on my credit report but a year later a different collection agency called me up looking for the money. Oh heck no. I told them off and they never called me again. Once you owe, they get cutthroat and sell the debts off in a round and round. Just be careful.

 

[SondraC]

I have a question about this. My friend is going through a debt settlement company so her debts will eventually be settled. She doesn't have any assets. What does claiming insolvent on the amount mean? We just had the taxes conversation in the car the other day.

If you google this there is a lot of information on this. I helped someone do this a couple years ago, and out of 27,000 dollars only a couple thousand needed to be claimed as income. It took a little bit of time getting all the info together, but it wasn't as difficult as we thought it would be.

 

[scribega]

If the OP could not even make the minimum payment how is the OP going to come up with $6300 today and the tax on the $17700 by next April? Should start making payments now or they may get hit with a penalty and interest for underpaying thier taxes.

As of right now, coming up with the $6300 in the next month or two will probably be next to impossible. If somehow I could, then I would start putting some money away for the taxes for next year.

 

[minnie1928]

As of right now, coming up with the $6300 in the next month or two will probably be next to impossible. If somehow I could, then I would start putting some money away for the taxes for next year.

I would pursue getting things in writing, that process alone might buy you some time to scrounge up the money.

I wish you the best of luck, I'm sure this is all very stressful.

 

[faindrops27]

I agree and to those who have thought differently he has been to disney three times in the past three years. I would love to do that, but my financial obligations do not permit this!

Well, maybe his family had both jobs when they took the trips. I am sorry, people. Things happen. Especially in this dire economy. Don't make the man, and his family feel worst. For things out of their control.

 

[hentob]

As a BofA user, I am HORRIFIED that they are doing this!

Personally, I think one should have to claim bankruptcy and take the penalty, if they charged 24,000.00 worth of items/services and then could not pay for what they purchased. SORRY, but so many people are Draining our country dry with living above their means and then walking away from their financial obligations.

The perhaps they shouldn't put that much money on a CC card to begin with. Of course it is their fault!!!!!!!!!!! Who else's fault could it be? If they have $6000 they could have been paying a great deal more than below minimal payments.

Thank you. Lots of trips in the siggie, no savings.

We as taxpayers suffer.

 

[aka-mad4themouse]

That's enough. The OP asked a question and it's been answered. No need to continue berating him. This thread is closed.