Beware When Accepting a Debt Settlement Offer

On May 18, 2015, in Debt settlement, by John A. Weber IV, ESQ.

Forgiven debt may be taxable by the IRS!

The Second Circuit has ruled that debt collectors don’t need to warn clients of the potential tax liabilities associated when making a settlement offer for less than the full amount owed.

In Isaac Altman v. J.C. Christensen & Associates Inc., docket number 14-2240, the U.S. Court of Appeals for the Second Circuit stated in it’s opinion that the “fact that a debtor may then have to pay tax on the amount saved is simply not deceptive…”

Isaac Altman received a letter from J.C. Christensen & Associates stating that he could save up to 50 percent on his $6,000 debt if he made a payment upfront. Altman alleged the letter was deceptive violated the FDCPA’s prohibition against false, deceptive, or misleading representations. As stated above, the Court was not convinced.

So, you may want to consult your accountant/tax preparer before accepting a debt settlement offer. Additionally, you generally won’t have this tax issue if you file for chapter 7 bankruptcy. Therefore, it may be in your best interest to also consult a bankruptcy attorney.

The Law Firm of Vaughn & Weber, PLLC

393 Jericho Tpke. #208

Mineola, NY 11501


Comments are closed.

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation. This website is Attorney Advertising. It does not form an attorney-client relationship. We are a debt relief agency and a law firm that helps people file for bankruptcy relief under the U.S. Bankruptcy Code – Title 11. Prior results do not guarantee a similar outcome. Proudly assisting residents of Long Island, Nassau county, Suffolk county, New York City, Queens, Brooklyn, Bronx, Staten Island, Manhattan

Copyright © 2019 Law Firm of Vaughn, Weber and Prakope, PLLC
All Rights Reserved