but collect is the IRS motto when it comes to forgiven debt.
Did you lose control
of your credit cards to the point that you simply were unable
to pay the balance? What a relief it was when you discovered
you could negotiate with your credit card company to get it
to accept just half of what you owed.
Getting your credit card
bill cut from eight grand to $4,000 certainly helped your
personal bottom line. It also could be a boon to the U.S.
Treasury. Why? The tax law generally considers the amount
you get Visa, MasterCard or any creditor to write off as earned,
and therefore taxable, income to you. Expect the accommodating
debt-holder to send you a Form 1099 detailing your discharge
of indebtedness as miscellaneous income.
You say you didn't get
the official tax statement? Don't breathe too easy. It's quite
possible that your unexpected "income" was reported to the
IRS even though the company accountant didn't fill out your
Not every debt settlement,
however, has to pad Uncle Sam's pocket. Check out this Bankrate
for more on taxes and discharged debt, including instances
where you don't have to count the forgiven debt as taxable