Legal Question in Credit and Debt Law in Maryland

I have recently been in touch w/ my creditors & have agreed to settle my unsecured credit card debt for less than 50% of what I owe on it. Now I heard on the news today by doing so, I may be slammed w/ big fines & fees from the IRS. Please help me asap w/ advice. I certainly don't need to create more credit problems


Asked on 4/05/10, 5:29 pm

1 Answer from Attorneys
Daniel Press Chung & Press, P.C.

It's not "fines and fees," it's taxes. Debt is cancelled or forgiven is treated as income for tax purposes unless an exception applies. There are two major exceptions: (1) debt that is cancelled by discharge in bankruptcy, and (2) cancelled or forgiven debt to the extent that the taxpayer is insolvent. Insolvency is determined on a balance sheet basis including all assets and liabilities, including exempt assets. See an experienced bankruptcy or tax lawyer for advice on your specific situation.

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Answered on 4/11/10, 6:20 am


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