For those struggling to pay huge amounts of credit card debt, it's important to understand that creditors may be willing to settle your debt for less than you owe. This is a viable alternative to bankruptcy for many debtors. Robert A. Schwartz, a Rochester, NY, bankruptcy and debt relief lawyer, is here to help you find financial solutions that work.

He stresses that while a creditor may agree to settle your debt for a lesser amount, you may still be subjected to some tax consequences. Here Attorney Schwartz discusses those potential consequences:

• Your Canceled Debt May Become Taxable Income: When a creditor settles on a lower amount than what you originally owe, they are basically forgiving and eliminating a part of your debt. This may not be much of an issue for a tiny dollar amount, but with larger balances and larger forgiveness, the IRS may become involved. They may see your cancellation of debt as income that should be taxed. This means, on your next tax return, you will need to claim the forgiven debt amount as taxable income and pay taxes on it accordingly.
• Your Tax Obligations Aren't Erased With Bankruptcy: For debtors who simply cannot pay the tax obligation on forgiven credit card debt, bankruptcy probably won't eliminate those charges. Recent changes in IRS law stipulate that tax money owed cannot be wiped away with bankruptcy. So, in the end, you could be saddled with some significant debt even after bankruptcy.
• A Debt Relief Lawyer Can Help: This is where a bankruptcy and debt relief lawyer can help immensely. Your attorney understands the intricacies of bankruptcy and tax laws, and they know how to utilize these laws for your best interests. Robert A. Schwartz works closely with every client to ensure they have explored all of the legal avenues available and are making the best choices for a brighter financial future.

Call Robert A. Schwartz at (860) 232-9959 to schedule a consultation with a debt relief lawyer today. You can also visit his firm online to learn more about his services. Settling a credit card debt is usually a smart move to make, but be sure to understand the tax consequences before you sign on the dotted line.