Debt Solutions.  Credit Card Debt Solutions.  These are broad terms. What is the optimal debt solution? The reality is that there is no optimal debt solution that fits everyone. The key to finding your optimal solution, is to consider all of your options. What you do not want to do is to go to one type of firm (e.g. credit counseling, debt settlement, bankruptcy, etc.) and only hear about that option. Most of the companies that deal with debt, sell one option (and yes, they are selling a service). Here are some of the relevant questions:

1) Debt Solutions question #1: What type of debt you have. Is it a solution to credit card debt you are looking for? Tax debt? General unsecured debt like medical bills and signature loans? Mortgage debt? A debt settlement company generally handles only credit card debt and other unsecured bank debt (like a signature loan or unsecured line of credit). Most consumer credit counseling companies also handle only credit card debt. If the debt you were considering settling is medical debt, tax debt or mortgage debt I would advise you to consult a bankruptcy attorney.

2) Debt Solutions Question #2: What resources do you have to pay the debt? What is your income level? Is it high or low or somewhere in between? Do you have a lump sum of money available to pay off some of your debt now? If your income is low and you have no assets to offer for settlement, Chapter 7 bankruptcy would be worth considering. If you are a higher income client, you may not qualify for chapter 7 bankruptcy. In that case, your options are to file a chapter 13 bankruptcy or to settle your debt.

These are the 2 basic “filter” questions to get you pointing toward your optimal debt solution. Then, there are other thing to consider, like length of time until you are debt free, how various courses of action affect your credit rating, potential tax ramifications of each course of action.

Most of the companies you will find on the internet are not actually debt solution companies at all. They are marketing companies that sell your lead to another company. Most of the people that you will talk to you are required to only have a high school education. Most of them took a 2 week training course.

But your debt situation is a very serious matter to you and it deserves to be treated with some real thought. At Trident Debt Solutions, we go over all of the options available to you and we discuss the pros and cons of each option. We are a small firm, and you will speak directly with me, Steve Craig, attorney. We are debt management consultants who leave you with a customized game plan to get you out of debt quickly. When you call, I will consult with you and after getting a thorough understanding of your situation, I will tell you what your Optimal Debt Solution is. If we take you as a client, we will see your case through until you are debt free!

Steve Craig is an attorney practicing in Denver and Boulder, CO. He has been in the debt reduction and elimination business since 1994. He has helped more than 2500 clients get out of debt with no consumer complaints.

What are the tax consequences of credit card debt settlement? What is the tax impact to you when you negotiate a debt? Will I get a Form 1099 after settling a debt? Are there any tax reporting rules I should be aware of with respect to debt settlement? Yes, there are. Before you sign up with a debt settlement program, you should know the tax consequences of your actions. You should consider getting an opinion from your CPA before you start. If you do not have one, or your CPA is not familiar with the tax consequences of debt negotiation, please call me and I will give you the name of someone who does. Do not rely on anyone’s statements regarding tax consequences of settling debt (including this blog), other than a CPA.

That disclaimer made, here is the basic rule:

The amount you save in a debt settlement is not taxable if you have a negative net worth at the time of the settlement. If you have a positive net worth at the time of the settlement, it is taxable. You will receive a 1099-C (”C” stands for “cancellation of debt”) for all debts settled. In my experience, most of the clients we have settled credit card and other debts for had a negative net worth. But there were a few that had a positive net worth. So total up your debts. Then total the net value of your assets (so for your home, you take the fair market value and then subtract the mortgage and cost of sale if you were to sell it.) If your debt exceeds your assets, you are insolvent. If you have any doubt, call me, or get an opinion from your CPA.

This is called the “insolvency” exception to the general rule that cancellation of debt is taxable. You are insolvent to the extent that your liabilities are more than the fair market value of your assets immediately prior to the debt settlement. So you will need do a personal balance sheet of your assets and your liabilities. There are 2 forms that your CPA will file with your tax return. The first is form 982 and the second is your personal balance sheet.

There are more complex issues with respect to income tax ramifications of negotiating a debt. For example, IRAs and 401k holdings may not count toward your asset total for these purposes (this is very good news!). In other cases, some of your settlements may not be taxable (up to the point you become solvent), and then the rest will be. If you would like to discuss your situation with me, please call me at 303-520-3414. In many cases, our clients have been pleasantly surprised to find there is no tax liability.

Are attorney fees on debt settlement tax deductible against this income?  Yes.

Stephen Craig is a debt settlement attorney in Denver who works exclusively for individuals and small businesses in debt.

If you live in Denver or Boulder, CO, or anywhere in the state of Colorado, I am a credit card debt settlement attorney here who can help you locally. Dealing with a local debt settlement program, you can come on in to our office for an update any time. As a Colorado attorney who has helped consumers get out of credit card debt for years, I know the ins and outs of this business as well as anyone. Another advantage of hiring a Colorado debt negotiation lawyer, is that debt negotiation can vary from state to state. To settle or negotiate debt quickly, it is best to deal with a program that has existing relationships with your creditors. For example, if one of your accounts has been referred to an attorney in Colorado for collection, I probably know them, and can resolve the matter out of court with a call or two. When negotiating debt for you, I know what each creditor is likely to accept before I start. Also, I will give you my Colorado Bar Association number so you can check my spotless record for 18 years. Your debt settlement program should be accessible– I give you my cell phone number so you will never get caught up in voice mail.  Negotiating debt is never easy, but when you hire an expert debt negotiation lawyer you can expect results!

If you do not live in Colorado, we can still help you, and give you references of past credit card debt settlement clients from many states around the USA.

Steve Craig

Debt Negotiation Lawyer, Denver, CO