What are the tax consequences of debt settlement?
Debt settlement may have tax consequences, but usually will not. A creditor can give you a 1099 for amounts of debt forgiven, but the IRS takes the position that this is not taxable income if the debtor is “insolvent” at the time of the settlement. This basically means that you had more debt than assets. If you are not “insolvent”, this may not be a good program for you because you could have a tax liability. Please consult a tax advisor regarding this issue. Ask your tax advisor to take a look at Rev. Ruling 908. If you get a 1099 during the term of our program, call us and we will give you more information.
