The 1099 0f A Credit Card

Hello, my friend and future millionaire.

We’re going to take a minute to step off the path of the million dollar roadmap.

I have something I want to cover with you that caught my attention when coaching other people… being behind on payments.

With everything that’s going on now in the world, with COVID and all that kind of stuff, a lot of people have fallen behind on credit card payments and other bills. 

When you’re behind on credit card payments, and it gets to be around the six month mark, the credit card company will try to sell your debt to a collection company and let that company take over trying to collect money from you.

The collection company may call to talk with you about a settlement agreement.

This means they’re willing to create a payment plan and/or adjust interest rates so you pay an agreed upon amount that is less than the original total of the debt.

They’re trying to recoup at least some of the money that you owe.

The thing I want you to be aware of is this:  What happens when you do that is the money that you spent on the credit card versus the difference that the settlement is for, will be considered income, and you will get a 1099 at the end of the year from the credit card company.

Now, I’m not here to tell you whether it’s a good or a bad thing for you; that’s totally your decision. 

What I am here to do is to make you aware of the situation. 

Don’t think you’re getting a good deal and debt is just forgotten.

At the end of the year you’re going to get 1099’s from every credit card company that you make a deal with and you’re going to be responsible for paying those taxes on the difference between what you agreed to pay and what you actually owed.

Because the way the IRS looks at it is you have spent that money on credit cards for whatever your purchase was so it’s considered income to you and your family.

Now, like I said, I’m not an accountant and I’m not an attorney, so you’re going to have to use your own judgment here. 

But the main thing I wanted to do was make you aware of the situation so you know exactly what’s going on and you can handle it the best way that works for you.