However, If You Settle Your Debt, Make Sure That Your Creditors Report It As" Paid In Full"

Category: Finance, Credit.

Going bankrupt is only one of many solutions to your debt, but it is something that many people who are struggling under the weight of their credit responsibilities resort to after months of hardship in trying to pay their bills. There are a few options you can resort to when you file to relieve yourself of your credit card debt, but all will be temporarily devastating to your credit.

Sometimes your income is just no match for the amount of money racked up on your credit card bills, to say nothing of the interest that is added to that. However you choose to remove your debt, it often results in debt forgiveness on your behalf in part of the credit card company. They are required to send you this as proof of debt forgiveness. When this occurs, you will receive a form called the 1099- C form from the credit card company to which you owed the money. A 1099- C form basically, is a form, as stated before that is a formal statement that you are relieved of the debt owed to the specific credit card company. This form is required of them to show that you really were forgiven of your debt, and that you cannot be called to pay money on that debt again in the future. These are also sent by anyone you owe money, various financial institutions, like credit unions, and other government agencies.

This is not simply something you can do often, leaving you debt free and ready to start racking up your credit balance again, but rather a last resort for someone who really and truly cannot pay their debt back. Your credit will suffer tremendously, and the record of your failure to pay the debt back will be on your credit report for several years, thus making it difficult to get sufficient credit in the future, such as mortgages or substantial bank loans. It of course is heavily laden with consequences that will affect the debtor for years to come. You will also probably be prohibited to do business with the credit card company or other type of agency to whom you owed the unpaid debt. However, there are several other credit agencies with which you can do business to help you get your credit back up to a descent number, eliminate the black, and in time marks from your credit report. This is almost given. If you do not end up having your debt forgiven altogether, but rather" settle" your debt with the credit card company, you will usually pay a smaller amount of money that the company will accept as a full payment.

In debt forgiveness, you have to claim the money that you do not pay back as income, because that s what it becomes. Make sure that when you do this, the credit card company does not report the remaining amount of money to the IRS making you have to claim it as income. However, if you settle your debt, make sure that your creditors report it as" paid in full" .

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