In effect, yes. The IRS considers bad debt to be the same as lost revenue for the credit card company or whatever institution issued the card.
Using an accounting technique called charge-off, the card issuer can account for the uncollected bad debt as a reduction in its earnings, which can reduce the company’s tax liability for the year.
Don’t think that the company’s tax write off means that you’re in any way relieved of the debt.
They may still pursue the debt from you, sell the debt to collections agencies, or, in an increasingly common approach to dealing with debtors, the company may choose to forgive the debt.
If that sounds great, it isn’t. They’ll provide you with a 1099-C tax form for the “income” of the forgiven debt, and let you work it out with the IRS.
Debt collectors don’t have to ruin your life. Take a few minutes and call the attorneys at Zelenitz, Shapiro & D’Agostino at 718-599-1111 and talk to an experienced bankruptcy lawyer for free.