Companies incur a particular expense known as a debt write off. This expense is incurred when the company gives up any hope of recovering monies owed to them by another company or individual. Basically, the company is telling the IRS that the prior reported income is no longer income as the money was not collected. Commonly from many people, this is perceived as a tax reduction or break resulting from the unpaid sale, however there is more to the reality of it all. It begins with a loss on the materials and time that was involved with the product sold.
If you are unable to pay a debt in any situation, at least avoid the typically misconceptions that are bolstered by settlement attorneys. Their tactic is claiming the suit against you and the tax deduction is more valuable to the client than accepting any settlement. Basically this is only a threat, as the tax break can still be taken on the difference from a new settlement and what was previously owed. Getting full recovery is the most they can obtain with a full write off, and nothing is the least the collector can get, there is nothing in-between do not let them lead you to believe otherwise.
When you find yourself in a desperate situation, it is difficult to work with settlement attorneys. Wanting their fees up-front the defense attorney convinces you the outcome for you will be positive, while pressure is non-stop from the collector’s law firm. Your best hope to safely deal with all the parties involved, is by speaking intelligently through the ability to understand the terminology and laws surrounding your situations such as the debt write off clause. As you deal with your unfortunate situation the ability to add to any conversation with knowledge and understanding of the background facts will absolutely prevent typical blatant abuses by the parties who normally have the best hand, as well as realistic outcomes being discussed.