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I have heard that any amount forgiven over $600.00 becomes taxable income for debt settlement and that amount is sent on a 1099 tax form. Is this true?

Yes, debt settlement does have tax consequences that need to be considered. You will owe taxes on a portion of the debt amount that your debt settlement company saves you by negotiating your debt balance down with each of your creditors.

You need to discuss this with the debt settlement companies before you join their program so you know what to expect and can plan for your tax bill. The estimated amount should be budgeted just like they will do for your credit card bills so that money can be put aside on a monthly basis. Thanks for the question.