Hold On To Your Wallets...

I just personally found a new way our government is picking our pockets, it's legal too. It seems that if you were forgiven debt from a credit card company, uncle sam (lower case intentional) can tax you on that forgiven debt. Here's how it worked on me... In 2006 I used a credit counseling service for some out-of-control credit cards. The total owed, according to the blood-sucking credit card company (not mentioning any names - Chase) was roughly $20K. They negotiated and agreed to cut $9K and I could pay the rest off in monthly installments. A couple of years later (Mar 09) I got my letter saying it was paid off. This made me happy. Now, one year later, I find out that I have to pay taxes on that $9K that was "forgiven." Plus interest and penalties. Will the additional $1,600 I have to pay in taxes put me in the poor house? No, but it seems a bit wrong to me. So I did a little research and found that creditors who are forgiving debt (I thought it was from the kindness of their little ole heart) can report this to the IRS as Net Operating Loss (NOL). Well good ole uncle sam can't miss out on an opportunity to rape, pillage and plunder hard-working Americans, so they go after the taxpayer to collect the taxes they didn't get from the credit card company. To make this tale a little more interesting, a law was passed in Nov 2009 that allows credit card companies to go back 5, count them five years to claim their NOL. Now, let's get to the brass tacks here. Who mostly uses credit counseling services? People who have fallen on hard times and people who can't afford the high interest rates and penalties most credit cards impose. So let me get this straight... These tax regulations (laws) help the big credit card companies and hurt those who can afford it least. I thought the current administration was out to stop the the "Evil" big corporations and help the "Little" people. I guess they have to find a way to pay for their health care plan somehow, I didn't think it would be on the backs of those who could afford it least. How's that "Hope" and "Change" working out for you now?

D.