Like with everything, there's always a catch. Any settlement offer you receive in the mail will generally include a disclaimer that if at least $600 in debt is forgiven or wiped out as part of the settlement offer, that information will be reported to the Internal Revenue Service. That means, come the beginning of the next year, you will likely receive a 1099 for the balance that was forgiven. You will have to pay taxes on that amount, and if you are already in dire straits financially, the headache will just increase.
So what do you do? The credit card debt is increasing every day, and you know that a lawsuit is inevitable. You're scared that your wages will be garnished, or perhaps your bank accounts will be frozen. Worse, you might worry that a creditor might seek to liquidate your personal property to pay the debt. The alternative of risking your tax refund on a settlement offer does not seem much better?
Well, have you thought about bankruptcy? Instead of settling a debt for 40% of what you owed and taking a hit next April 15, you can wipe out virtually all of your unsecured debt, and that discharge will not constitute income on your 1040 return. That means that you won't have to pay income tax on the discharged debt. No payment plans to a collections company. No lawsuits. No judgements, garnishments, levies, or other unpleasantries.
Now, I will warn you that bankruptcy is not an easy process. You will have to expose all of your financials to the bankruptcy court. When you file, you will have to attend a Meeting of Creditors, where any and all of your creditors will have the right to appear and ask questions regarding your finances. 99.9% of the time, they will not appear. The Chapter 7 Trustee will conduct the hearing, which is designed to make sure that you have fully disclosed all your finances, and to ensure that either there are no assets that can be liquidated for creditors, or that there are no assets which you may be entitled to down the road. In most cases, the debtor does not have any assets, and they will receive a discharge while retaining their property.
So how do you begin the process? What you need is an experienced bankruptcy attorney by your side every step of the way. While you have an absolute right to represent yourself, the United States Bankruptcy Code is complicated, and you will want to make sure that all your bases are covered.
Call us today. We are here to help you. To set up a free, confidential consultation, call our office at 908-872-6590.