Here they come! (Bank of America $8100 for me!) Maybe we can all post here so we have one thread that will help everyone.
Just got one for over $6,000 from Discover. While we're on the subject, how funny it is when creditors make a big deal about the tax implications of a settlement? "It's really awful to settle this for less than the full amount because there will be income tax associated with it." For that to be bad, the income tax rate on canceled debt would have to be greater than 100%.
Well, they do want to get as much as possible from us deadbeats (LOL) and if they can convince us settling is bad they might get most of what they think they're owed. That said, this $8200 from BOA is going to cost me $1300 in taxes. Note that you can also fill out a form 982 and claim insolvency so you do not have to pay taxes on the debt.
I'm curious - has anyone ever fought these on the grounds that the debt is invalid or hasn't been sufficiently documented / proven? I mean, I can send you a form swearing that I've just forgiven that $25,000 debt you owe me, but that doesn't mean I'm not lying.
I was going to ask the same thing. Surely this has been litigated. In a typical lawsuit that "settles" one side pays less than originally agreed, but you don't hear about them having canceled debt income. For instance, we contract to for me to buy your widgets for $1,000. I don't pay. You sue. We settle for $600 and both go our merry ways. That's the end of the story; the government never comes calling for it's slice of the $400 canceled debt. How come a credit card settlement isn't exactly the same thing? We have a "dispute" as to whether I owe the bank this money. They threaten to sue me, and we settle for something less than that. They never proved I owed it in court but they just go ahead and report it to the IRS as if they did.
