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Category: Consumer Protection Law
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I have finished paying off a credit card debt with a major

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I have finished paying off a credit card debt with a major bank. I had made an arrangement with the bank to pay the principal, but still owed the interest. I have paid the bank what was agreed on and owe them no more. I have been able to find a part time job, but still make much less than before I lost my job.
The bank waived the interest, but said I would have to pay taxes on the interest next year when I have to file my taxes.
Is there any way to negate or reduce this payment on the interest I will owe?
Thanks

LegalGems :

Hi! LegalGems here. My goal: To Do My Best To Assist You. Please remember, I can only provide general information,as this is a public forum.

LegalGems :

Congratulations for successfully paying off this debt - I know credit card debt can get out of hand.

LegalGems :

When a creditor waives a debt, they claim it on their taxes as a loss. In turn, the debt then becomes taxable to you. The bank will send you a 1099 C http://www.irs.gov/uac/Form-1099-C,-Cancellation-of-Debt

LegalGems :

They only send this if the debt waived was greater than $600.

LegalGems :

This alerts the IRS to the waiver of the debt, and the amount waived is treated as income to the debtor.

LegalGems :

Unfortunately, there is no way to avoid this.

LegalGems :

You will be taxed on the amount according to your relevant tax bracket.

LegalGems :

Hello.

Customer:

Thanks very much for your answer. I appreciate your help!

LegalGems and other Consumer Protection Law Specialists are ready to help you
I wanted to be sure and thank you for using JA/Pearl.

I hope you found the information I provided useful.

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Take care.

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