What Banks, Debt Collectors and Junk Debt Buyers Don’t Tell You About Settlement Agreements

Credit Card Debt ‘Forgiven’, but not forgotten by the IRS

We are often consulted by those who are very unpleasantly surprised when after having negotiated a settlement of the amount of the debt they owe, they receive a receive 1099-C “cancellation of debt” tax notices from the IRS.

Example: John Smith receives a letter from the law firm of Pressler and Pressler demanding he pay the delinquent balance on his credit card of $5,000.00, to Palisades Collection. Smith has never heard of Palisades. He is told that the debt was purchased from ABC Bank where Smith once had an account. What Smith is not told is the Palisades is a ‘junk’ debt collector that purchases limited information about old debts for about two cents on the the dollar and that if that tif he disputes the debt they cannot prove that he owes it. However, Smith who is uncertain about whether he owes the debt wants to avoid collection calls and a possible lawsuit. He agrees to a pay $2,500.00, to Palisades to settle the debt.

What he is also not told is that he will received a demand from the IRS that he pay taxes for $2,500.00.. the amount of the debt ‘cancelled’ by the creditor.


Contact an Edison Bankruptcy Attorney from Gillman, Bruton & Capone Today

Facing overwhelming debt is a daunting prospect. Calls from creditors and threats of repossession or foreclosure can take a toll on families. It may seem impossible to dig out from a hole and regain financial flexibility and freedom. Thankfully, an Edison bankruptcy lawyer wants to help you. Unlike many other law firms that suggest filing for bankruptcy as the sole chance to escape from under debt, we recognize that many alternatives may be available that bring a similar outcome. Even when bankruptcy is the best option, we provide you with all of the information you need to protect your interests. Give Gillman, Bruton & Capone a call today to schedule an appointment and a free case evaluation.

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