The Real Deal With Credit Card Debt Forgiveness Act of 2010

Probably one of the most promising laws that President Barack Obama has signed during his short stay in the White House is the Credit Card Debt Forgiveness Act of 2010. With this law, citizens with at least $10,000 of bad debt can find a way to clear up at least half of that amount and settle the rest through a debt settlement company.

While a lot of Americans are basking in the fact that they will soon be debt free, it is also their responsibility to take note of the real deal behind credit card debt forgiveness.

Here is a detailed list of some of the necessary steps or factors that you need to consider when applying for credit debt forgiveness to free you from over half of your current debt.

In order for you to avail of credit card debt forgiveness, you need to sign up for the services of a trusted debt settlement agency. No, you cannot just go to the government and tell the receptionist that you are there to settle half of your debts. Your debt would still go through an analysis to determine how much of your debt can actually be written off.

Whatever part of your debt that has been written off should be declared as income and is, therefore, taxable. For example, you have a $20,000 debt from your credit card and $5,000 has been approved to be written off. The $5,000 written off should appear on your 1099-C Form as taxable income. However, there are also situations wherein you are exempted from filing the amount written off as taxable income, for instance, when you have filed for bankruptcy. To be certain about the total amount of taxable income that you need to declare, it would be ideal to bring your 1099-C Form to a tax officer and have it analyzed for you.

Although you have fully settled any amount left after the credit card debt forgiveness, you have to remember that your credit standing will not increase. In fact, applying for credit card debt forgiveness will actually drag down your credit standing some 70 to 130 points down. This will remain in your record for the next seven years and will definitely hurt your chances at loan applications in the future. In the rare event that you qualify for a loan, chances are you will not be enjoying the same low rates that those with good credit standings have.

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