How does Settling a Credit Card affect your credit and Tax return?

If I settle with a credit card company, How will my credit report be affected? Will this affect my tax return in anyway? If so How?|||Settling for less than the full amount owed can negatively impact your credit. See if you can get them to agree to report it as "Paid as agreed." If it's reported as "settled" then you will take a hit. And of course any delinquency that lead up to the settlement will remain on your record for 7 years.





The amount forgiven is taxable income to you. If they forgive $10,000 and you are in a 15% tax bracket, you'll pay at least $1,500 in tax and up to $2,500 if it pushes you into the next bracket.





You can avoid the tax if you are insolvent at the time that the debt is forgiven. You are insolvent if you are bankrupt or if your liabilities (everything that you owe) are greater than the value of your assets (everything that you own). If you are not up to speed with standard bookkeeping practices, i.e. you know what a Balance Sheet is and how to generate one, you should seek professional assistance for the tax year that the debt is forgiven.