One option people have for dealing with their debt is to negotiate a compromise figure, so as to get a balance that they can afford to pay, either in a lump sum or in payments over time. They may not be able to afford $7,500, but they can afford $5,000. In this way they can avoid bankruptcy and still pay their creditors.

A complication comes in, however, in that the $2,500 you saved on the deal is considered taxable income by the IRS! This can come as a nasty surprise when it comes time to prepare your return. But there may be a way to avoid those taxes if you know what to do. That is why I invited local accountant Jerry Glauser onto the show to talk to me about the solution to this problem.

Steven J. Richardson
Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.