Whether or not your debt settlement will have tax implications is determined by the IRS code. This is a question best left to your CPA, but the general rule is that if you had a positive net worth on the date of the settlement, it will be a taxable event. You’ll receive a 1099-C form (the “C” stands for “Cancellation of Debt”) for every debt on which you saved $600 or more, and those amounts will be considered taxable income. In contrast, if you had a negative net worth at the time of the settlement—in other words, if your liabilities exceeded your assets at that time—you will owe no taxes on the amount of debt that was forgiven.