Debt settlement

I worked out a settlement on a $2500 long overdue debt. Agree to pay $1800. Just finished paying that off. Here is the issue…i just got my tax return, and I could pay the remainder, but should I? Or do I honor the agreed upon settlement?

If you’ve paid the agreed upon settlement, then you’ve satisfied the obligation.

Legally you do not need to, but I think it’s worthwhile to consider that debt doesn’t just magically disappear when someone makes a settlement.

The loss/cost is passed on to others.

I hear numerous radio advertisements about “call this number and we will get your creditors to settle for pennies on the dollar, owe taxes? We can get the government off your back and you won’t have to pay in full!”

If we make an agreement to pay of our own free will, then yes, we are obligated to pay it if we can. Passing the buck to others if we can pay is a moral issue.

If there is no reasonable way to pay the money back, because legal papers have been signed etc, then I would consider using it to pay a bill for someone who cannot, like heat assistance etc that power companies have.

Up to you…or you could pay it off in installments so that you would feel you fulfilled your obligation, in full, if you prefer.

There is nothing to prevent you from sending in $800 more to totally pay for what you owe.

Legally, you are not required. Morally? That is a good question, which is why you asked it.

I don’t think you are obligated.

Are you aware that in the United States you owe income tax on the difference between what you paid and what you owed? Forgiveness of debt is considered taxable income. However, if you pay it off, you can file an amended return. (If you didn’t mention this on your tax return, you can also file an amended return for that.)

If you decide to pay it off, you should contact the company you “owe” it to and make arrangements that will not mess up their bookkeeping.

Hope that helps!

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