Im about to pay off credit card debit.Can I negotiate with the company?Will it hurt my credit& taxes do I pay?

Question

I am paying off $30,000 in credit card debit. I want to know if it will hurt my credit if I negotiate with the credit card companies? Also, if they do negotiate with me that will be an earned income for me at the end of the year...how much do I have to pay tax wise on that money? Would it be better to just pay it all off or to actually negotiate with them?

Answer 1

Yes, it will hurt your score, especially if the accounts are currently in good standing.  The account will be closed and marked "settled" -- same effect on your score as a charge off.  Some credit card companies won't even consider a settlement for less than full balance.

If you do negotiate a settlement, the credit card company will likely send you a 1099 for the forgiven portion and you will have to claim that as income on your taxes.  Figure about  20% to 30% for the taxes.

Answer 2

Yes, paying less than what you owe will be reported to the credit reporting agencies, and it will hurt your credit.

Yes, you will owe taxes on the difference between what you owe and what you pay. It is not earned income. Earned income has a very specific meaning. But it is income, for income tax purposes. You will pay taxes at whatever your marginal tax rate is.

It is best, morally, ethically, and financially, to pay what you owe in full.