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You could, in fact, be liable to tax on the amount. Not because you stole it, but because you would be liable for the "cancellation of indebtedness income". Any
tax experts out there who could fill us in on the details? I'm not sure whether CC Cos report amounts written off to the IRS, but I wouldn't put it past them
to think of it.


I think that "written off" and "forgiven" are two different things.

"Writing off" your account is something done internally by a creditor. I don't think it means that you've settled your debt - it just means that the creditor decided that pursuing it will probably cost more than they'll get. Within your state's statute of limitations, they can decide to come back later after you.

When you're forgiven part of a debt, such as when the creditor or collection agency makes a settlement, your debt is settled and you don't owe anything anymore. Clearly in this case, you owe taxes on the part forgiven. (You received income because effectively somebody gave you money with which you paid off the deby that you owed.)

Anyway, as was said, the worse that can happen if you do not pay is that your credit report will be trashed and they can sue you and garnish wages. Depending on the amount that you owe, they will often give up before filing a suit....but I wouldn't count on it.

There are laws in which the collectors must act - the federal law is the Fair Credit Collection Practices Act, and can be read on the FTC web site. Go to the "Dealing with your Debt Collectors" board and read the first few threads....URL's were given there. Note that you can demand that a collector end communication with you, but this can have the unpleasant effect of forcing their hand and filing suit since they no longer have an avenue of trying to negotiate with you.

John
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