Credit Card Workout Agreements
A
workout agreement is when creditors agree to accept less
than what you owe them for full settlement of the debt. You
can do this by requesting an extension so you can just pay
out longer. If you have a significant amount of debt these
plans are not the best alternatives for you though. And
what I define as significant as far as debt goes is
subjective in comparison with your view. I also don’t like
these plans when you try to get the debt lowered outside of
bankruptcy is that the amount you write off can be taxed by
the IRS .
For example, John owes $45,000 in credit card debt, and he
arranges a workout agreement with all of his creditors and
lowers the amount he owes to $25,000.00. You will now have
to pay taxes on the remaining $20,000. These plans are only
of value to you if you have lots of equity in your home or
automobile that you want to keep. At that point paying
taxes on the amount you saved is still worth it, but if
that’s not the case a fresh start chapter 7 bankruptcy
might be the better option and probably less stress believe
it or not.