Debt settlement questions
To make a long story short, I've been looking for permanent full time work for over a year. A former client finally paid me but with a bad check. I warned my bank that I was leery of the check. After five days, I called the bank which informed me there was "no problem." So I mailed out my vendor checks.
Boom! Seventeen days later - 17 days - I got a form letter from the bank: the check bounced and they used my savings to make good all the checks I mailed out plus fees. (The asst. bank mgr. literally said to me, "It isn't our fault you listened to us." Swear to God, she said that!)
I was truly wiped out financially. Each month, for eight months, I have only been able to scrape by for rent, utilities, phone, car fuel and if anything is left over, food - in that order. Nothing in credit card payments because I literally didn't have it. (I told that to one collector calling. He actually said to me, "Gee, that is really unfortunate but I need you to send us $45 today.") I didn't have money for a medical problem either but no one seemed to care about that.
We finally caught the guy. He has agreed to pay a settled lump sum - 42% of what I am owed (yes, we know the money is good this time).
I am willing to make good to my credit card companies for 60% on the dollar which - if you take out all those ridiculous fees and high APRs - wouldn't be bad. (BTW, in the past when I tried to add pre-agreed-to late fees to my clients two small claims judges merely threw out the fees.)
So in the spirit of "everything is negotiable,” I want the card companies to remove all negative info on my accounts. I talked to two CRAs. They both basically said the same thing: "we merely report what is sent to us." So they don't care.
A while back there was a guy testifying before the Senate re: credit cards. He showed documents that he paid $22,000 on a $9,000 credit balance. I said then I'd kill myself before I'd do that.
I want my life back. I never had a mark on my credit for 39 years. Should I live the rest of my life based on eight months of problems?
After I pay off the credit cards at 60% on the dollar, all the bad credit info removed, and have the medical procedure finally done, I'll have about four or five months of rent/utilities/phone/ gas/food to live on while still looking for a full time job.
The second part would be ...
I've heard a rumor if the credit card companies settle with you like I want to, they then report the FULL amount to the IRS and you have to pay tax on the full amount.
A. Is that true? and
B. If it is true then what about the senior guy recently got BofA to "write down $400,000 on his mortgage and do a reverse mortgage for $80,000. Is he going to pay tax on the $400,000?
If no, then what's the difference and how do I avoid paying taxes on he "forgiven"/"adjusted"/"etc." money?
Thanks for reading. Look forward to hearing back.