Solved: Credit Card Settlement Dilemma
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Returning Member

Credit Card Settlement Dilemma

I have an old credit card debt that is due to "fall off my credit report" in Dec 2021.

They have sent me a settlement agreement that I need to respond to in the next 30 days. I can afford the settlement that they are offering, but am afraid of how it will impact my taxes this year. I believe that the remaining unpaid balance will be considered "income" and negatively impact my taxes.

I have 2 questions really:

  • Is there a difference between a "Satisfied Settlement" and "Charge Off" in regards to my credit score?
  • Is it best to pay the settlement agreement or do nothing and let it fall off my report?

Thanks for your help & input.

1 Best answer

Accepted Solutions
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Level 15

Credit Card Settlement Dilemma

Another user will likely chime in with a response, but you should be made aware that merely because the debt "falls off your credit report" does not necessarily indicate that you will not be receiving a tax reporting statement (i.e., a 1099-C) showing the debt as having been cancelled by the creditor. In that event, you will most likely have to report the entire amount of the debt as income.

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1 Reply
Highlighted
Level 15

Credit Card Settlement Dilemma

Another user will likely chime in with a response, but you should be made aware that merely because the debt "falls off your credit report" does not necessarily indicate that you will not be receiving a tax reporting statement (i.e., a 1099-C) showing the debt as having been cancelled by the creditor. In that event, you will most likely have to report the entire amount of the debt as income.

View solution in original post

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