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21-83 Steinway St

Queens, NY 11105

  • mahonylaw

Why Bankruptcy may be better!

A picture is worth 1,000 words, right? Take a look at the below bill that a friend recently received from the IRS. A couple of years ago, wishing to stay out of bankruptcy, he personally called a credit card company and negotiated a $31,000 credit card bill down to just about half. He slogged his way through several months of burdensome monthly payments but eventually he paid off the remaining debt and was very proud of himself. Now, looking back maybe the credit card representative told him he might be taxed on the forgiven portion of the debt, and maybe there was a notice regarding tax implications buried somewhere in the payment agreement he entered into with the credit card company, but ... let's cross that bridge when we come to it, right? Well... the bridge is right in front of my friend now and he can't cross it until he pays the IRS $4,781, which is the amount of tax they have imposed on the forgiven amount of his credit card debt. Put simply, the forgiven portion of the debt is treated as income, and this income, like all income, gets taxed. In a Chapter 7 bankruptcy, my friend's debt would have been forgiven in full without tax implications. Call me today at 917-414-6795 for a free consultation on bankruptcy and other debt settlement options.