Many perceive bankruptcy as something shameful. They think that their reputation will suffer irreversible damage ... This just is not so.
Chicago, IL (PRWEB) January 26, 2015
Chicago bankruptcy lawyer and financial rescue expert Richard Fonfrias of the Fonfrias Law Group, LLC, (http://www.chicagomoneylawyer.com), post a new article to his website addressing the common misconception that debt settlement is always better than filing for bankruptcy, warns that there can be adverse tax consequences when debt settlement is used to deal with creditors. Consumers should be aware that they will be taxed on any amounts over $600 that are settled or forgiven.
According to the Fonfrias article, debt settlement most certainly has its benefits. It offers consumers a way to eliminate debt. It also gives creditors tax relief and allows them to remove the bad debt from their books. What consumers should understand is that when a debt is settled or renegotiated, the Internal Revenue Service mandates that the creditor must issue the debtor a 1099-C, if the amount settled is over $600. The debtor must treat the amount on the 1099-C as income on his next tax return. By example, if a debtor owes $20,000 and the creditor is willing to settle the debt for $12,000, the debtor will have to pay income tax on $8,000; the amount that was forgiven. In cases where the total amount of money owned to a creditor is not large, debt settlement may be the best option and the least expensive way to eliminate the debt. But, in cases where the debtor owes a substantial amount of money or is being sued, the tax implications of entering into a debt settlement need to be weight carefully before proceeding.
“Over the years I have counseled hundreds of clients dealing with debt problems. With very few exceptions, I have found that most people will do anything to avoid filing for bankruptcy. Even when it is without question their best course of action, they are often hesitant. Many perceive bankruptcy as something shameful. They think that their reputation will suffer irreversible damage, and mistakenly believe that bankruptcy will have a negative impact on their ability to get credit for the rest of their life. This just is not so. Bankruptcy is a legal right provided for in the United States Constitution to help people make a fresh start. It is my job as an attorney to provide my clients with all of the facts, so that they can make the right choices that will positively impact their financial future,” says Fonfrias.
Richard G. Fonfrias, J.D.
Fonfrias Law Group, LLC
First National Plaza
70 West Madison, Suite 1400
Chicago IL 60602
About Fonfrias Law Group: The Fonfrias Law Group is Chicago’s experienced financial rescue and bankruptcy legal team, offering financial legal services including, bankruptcy, tax defense, debt consolidation, foreclosure defense, bad credit repair, debt management, loan and mortgage refinancing advice. Ready to assist homeowners and businesses in serious financial trouble and consumers with uncontrollable debt, Richard Fonfrias of Fonfrias Law Group invites your questions about Illinois bankruptcy, debt settlement, foreclosure, credit card debt, loans, tax liens or other financial concerns. For more information call 312-969-0730 or inquire on line http://www.chicagomoneylawyer.com