My Debt Stuff

Will I have to pay income taxes on savings after a debt settlement program if income is low?

Lee asked:


I am having to go through a program with a reputable debt settlement company and I understand I will get a 1099 at the end of the year after settlements are completed. I have extremely low income and was wondering if I would have to pay taxes on the savings?

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Tags: Debt Program, Debt Settlement Program, Settlement Company

This entry was posted on Sunday, February 14th, 2010 at 7:56 pm and is filed under Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

One Response to “Will I have to pay income taxes on savings after a debt settlement program if income is low?”

1. doreen k says:

   February 15, 2010 at 4:49 pm

   debt settlement

   The amount of forgiven debt will be treated as income and reported to you on a 1099-C. It will be combined with any other income you have and is subject to regular income tax.

   In all likelihood, you can expect to pay approximately 15% of the forgiven debt in taxes. However if your total income, including the forgiven debt, is less than $5,700 (which is the standard deduction amount), you will not be subject to income taxes.