Does anyone have experience with this? In 2010 I settled a bunch of credit card debt - and it feels amazing to be debt-free! We stopped using credit cards about 1.5 years before settling (most of the debt was incurred trying to keep our businesses afloat).
I filed taxes and we were due to get a nice refund - money we would use to catch up with our rent. Then the 1099-c forms came - i'd totally forgotten the forgiven debt was to be counted as income. It was going to take away $4500 of our refund (which we'd already gotten, btw.)
so i filled out an amended form, but havent sent it yet.
we were definitely insolvent (our debts were greater than our assets) at the time the debt was settled. If i file insolvency, we can keep the whole refund. but i am worried that would leave us open for an audit? i feel like the irs would have a hard time believing we only have about 12,000 in assets - a small IRA my dad help me set up a decade ago, 2 computers, wedding bands, and a home full of thrifted clothes and furniture.
are there any other drawbacks?
my credit is already damaged because of the settlement - i plan to rebuild that slowly (i actually still have a credit score that falls in the "average" range, because my credit was so good before all this).
any thoughts/experience would be great to hear.