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Should You Take Advantage of Debt Forgiveness?

Illustration of a person handcuffed to a dollar bill to illustrate debt forgiveness.Schools, institutions, and other lenders are in the news for writing off their balances owed, thereby forgiving the debt. What are the consequences of debt forgiveness, and should you take advantage of debt forgiveness offered by a creditor?

While it is true that when a debt is forgiven in whole or in part, you are no longer required to repay that portion of the debt. However, did you know that the lender or creditor may issue a statement that the debt was forgiven? In fact, for many, the lender must issue a statement and report the forgiveness to the IRS by issuing a 1099.

That is, of course, if the debt exceeds $600.

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How Bankruptcy Can Affect Your Debt Collection Efforts

Tiles spelling out the word bankrupt to represent debt collection and bankruptcy.Do you ask your client if they’ve previously filed for bankruptcy? If not, you might want to.

We are encouraged not to discriminate and to do business with individuals and companies who once filed for bankruptcy. After all, bankruptcy affords many companies relief, allowing them time to become better payors.

But did you know that if your client previously filed for bankruptcy, it may affect your debt collection abilites?

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How to Make Sure Your Promissory Note Isn’t Unenforceable

Image of a person writing to indicate signing a promissory note.When a company incurs a debt but does not have enough cash to pay, it may issue a promissory note to memorialize the debt in writing. If you want to get paid in the future, it’s important to make sure your promissory note isn’t unenforceable.

For instance, if a person provides services to a start-up company that is unable to pay because it is low on cash, the start-up can issue a promissory note. The note indicates the monetary value of the person’s services and the date said value is to be paid by. Presumably, the note would be issued in conjunction with the services provided. The note is valid and enforceable because it is given in exchange for the services provided.

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