Maryland Bankruptcy Versus Debt Settlement
In today’s difficult economic times, creditors are more willing than ever to settle debts for less than the amount owed. This sounds like a great deal, but it can become a big mess. Let me tell you how.
I recently had a client come in who had settled a fairly large debt for $4,000.00. Great news, right? No, because the IRS considers debt that is forgiven as income to you. And if you have income, you have to pay income taxes. So now instead of a large debt that could have been wiped out in bankruptcy, you have a large debt that can’t be wiped out. Ouch.
The idea is that if you borrow money and pay it back, you don’t have income and no taxes are due. But if you borrow money and don’t have to pay it back, it is like you earned that money and spent it. In other words, income to you. If you file a bankruptcy, the debts that are wiped out are not considered income so you don’t have this problem.
So before you settle any debts with creditors you owe it to yourself to talk to an experienced bankruptcy attorney and get all the information to make a good decision. Feel free to call us at
(443) 860-0088 for a free consultation.