I had some good news today, I was reviewing my tax information and have found that I'm getting back $5,000 in my income tax refund; I'm still waiting for some tax forms for mortgage interest and etc., but I looked them up on line to rough out my taxes. So now I can look at possible funds available to settle debt:
$22,000 Family Loan
5,000 Income Tax Refund
2,000 Loan Repayment
3,300 Hardship W/D
7,000 Sale of Used Car
5,000 Projected Savings
& Misc. Items Sold
$44,300
Finally, my Ace in the Hole is my loan against my retirement, if I have to settle in June I will have $18,000 available bringing the total to $62,300.
Assuming the debt creaps up to $150,000 and I can settle all his at 40% ($60,000), I would have enough for now, then later I'll need money for the IRS. I'm still not getting a clear answer from the''m on 1099C reporting. I've had two different answers so far and it basically comes down to the IRS and what they think.
When reading the guidelines it says that if a creditor forgives a debt, they must report it that year. However, the IRS says that if they do not write it off that year they don't have to file the 1099. Further, she told me that if I get the 1099C two years from now, that would be the point of settlement and I look at my insolvent position at that time. Otherwise, after I get everything resolved, then I get a 1099C and I'm no longer insolvent, I would pay tax because the credit card company didn't write it off yet. I believe that if I get a settlement in writing and I write a check, that is the point of settlement (the effective date the transaction occurred). I would fight this with tax lawyer. I don't think any of what she said made sense. So further would not give me a direct answer on "fair market value" on a home at time of settlement, says town has a value, I have a value and an appraiser has a value and the IRS would look at any documentation I had and decide. So the whole town was just assessed by a professional company and they came into my home, I would consider that an accurate figure? Oh she didn't know, only an audit would tell for sure.
I asked her if I could report 1099C cancelled debt withou a 1099C? Definately not, you have to wait for the issuing creditor. Even that doesn't sound right, I have read that if you do not get a 1099C you are still obligated to report it as income. So no real answers just more confusion.
I had an interesting call from Bank of America yesterday, I know I said I wasn't going to talk to them, but after they threatened to send me to collection, I figured I'd see what that meant. Well she just went over my scenario then she said she would let everyone know nothing had changed and I was still working to get together some money. Within an hour of her call, they called three more times last night. I didn't answer the phone because I had programmed it not to ring and it was on my caller ID and they left no message. This is not going to be good. Numerous calls a day from all these creditors jamming up my phone.
So good news, not so good news and confusion. Tomorrow is another day!
Saving Money for Debt Settlement
January 22nd, 2008 at 07:29 pm
November 3rd, 2008 at 10:59 pm 1225753152
I had a buyer for the rental, but both banks rejected the short sale. I missed my first payment in October, so they are now calling me. My buyer cancelled, so it looks like I will be trashing my FICO (720 as of this weekend) and getting foreclosed on unless another buyer magically appears.
I have just about wiped myself out carrying all the debt and making the mortgage payments... to be honest, once the foreclosure hits and my credit is trashed, I am tempted to stop paying B of A and Chase too, and work out a settlement with them. However, I don't know how I would get so much cash together. I have $5K right now. If I missed 5 months of payments and saved that amount, that would be another $3500. I could probably add another $500/mo to that by not contributing to my savings account anymore. I am expecting a tax return of $5K as well. But, that's still only $16K, out of $50K in CC debt. Only 32%.
I could try to defer my student loans for six months - that would "free up" $825/mo. But, they capitalize the interest portion, which is $550 of that payment. It's just robbing Peter to pay Paul. It would get me an additional $5K though.
I will also have a deficiency debt for the 2nd mortgage, and the tax implications of the foreclosure and other cancellation of debt. It's just overwhelming, but your website gives me hope! Thank you for sharing.
Robin in Mesa, AZ
September 7th, 2010 at 08:09 am 1283846965