Don't overlook the consequences3 of 7"Any settlement for which the forgiveness of debt is greater than $600 becomes a taxable event," Graves says. "If somebody were to settle a $10,000 debt for $5,000, the $5,000 becomes taxable."Graves adds that debt settlement also has a negative impact on your credit report and your future ability to borrow money at an affordable interest rate."The credit report lists the account as settled or paid for less than the amount owed," he says. "That is an indication to future creditors that you borrowed money but couldn't pay it back." Related Articles:Types of debt reliefPros, cons of debt reliefLimits of debt settlementDebt plan hurts creditRelated Links:Manage or settle debtFighting debt collectionGet my credit report?Dealing with old debts advertisement
"Any settlement for which the forgiveness of debt is greater than $600 becomes a taxable event," Graves says. "If somebody were to settle a $10,000 debt for $5,000, the $5,000 becomes taxable."
Graves adds that debt settlement also has a negative impact on your credit report and your future ability to borrow money at an affordable interest rate.
"The credit report lists the account as settled or paid for less than the amount owed," he says. "That is an indication to future creditors that you borrowed money but couldn't pay it back."
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