BofA Settlement at Less Than 30 Cents Per Dollar

I have 2 credit card accounts w/ B of A for a total of $30000.00. B of A has come to us with an offer to settle for $10900.00 and has further reduced that to $8900.00. They state the accounts are to be written off on June 30 2009.

My question is…is there a way to avoid the IRS coming at me for the difference. We are in pretty much an insolvent situation where we also owe the IRS over $20000 and our home is close to being upside down.

They are offering $8900.00 pay able in 3 months which will be extremely difficult to achieve. We could do $5000 if I borrowed from a relative. Any tips and/or advice would be greatly appreciated………Your site was recommended to me by a friend that used it to her great satisfaction

Jon

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Hello Jon,

Look into the insolvency exclusion to debt forgiveness which involves filing form 982 with the IRS.  Or, perhaps if you can prove insolvency to B of A, they may not issue a 1099 for the difference.

You write: “is there a way to avoid the IRS coming at me for the difference”

The answer is ‘yes’ if the consumer is insolvent or to the degree that the consumer is insolvent.

Thanks for the questions and hope this helps.

Paul

This author is not a tax advisor and this information should not be considered tax advice.  Please consult a qualified tax advisor for tax advice.