Benjamin Brook asked:


Depending on how much you owe, who you and how you have treated the company to which the money is owed, there is a chance you can negotiate a debt relief settlement that can save some money while ending your financial obligation. Many times companies do not want you to know about their willingness to possibly accept a lower amount on what you owe, but if they understand your circumstances, they may be more willing to negotiate a debt relief settlement with you instead of ending up in court.

When people have circumstances arise that prevents them from fulfilling their monthly obligations, contacting the creditor before the account gets too far out of hand and explaining the problem, often elicits some sympathy from the creditor. They may be willing to work on debt relief settlement through lower payment amounts or, if you are in a position to offer a lump sum payment, they may accept a percentage of the amount owed as payment in full.

However, it is best to contact them before the debt goes to collections, either internal or to an external agency. Once the account is in the collection status, the company can no longer work with the debtor on collecting a debt. A debt relief settlement will need to be worked out with the collection agency since they now own the delinquent account.

Unsecured Debt Best Bet For Settlement Offers

Many credit card companies and those handling medical billings are usually more open to debt relief settlement negotiations as unless they are prepared to go through civil court fr collections, they have little leverage in forcing payment. While notification of the credit bureau is often enough to solicit payments, a debt relief settlement offer is often their best bet of converting the account to paid status.

Collection agencies have learned, after years of being threatening to debtors, that overly aggressive collection tactics usually push the debtor closer to bankruptcy court, at which time there will be no debt relief settlement made by the debtor. Once the creditor has been notified of bankruptcy proceedings, they are prohibited to contact the debtor, even with a debt relief settlement offer.

For those wanting to stave off bankruptcy, working with the creditors directly at the start of their financial problems can make the creditor more amenable to accepting a reasonable debt relief settlement offer. By doing so, the debtor can stay out of bankruptcy and still reduce their overall debt load.

Anthony Dean asked:


Financial debt is a modern day reality for many millions of people but the situation is dealt with calmly there is usually a way to rectify the situation that may at times feel as if there is no end in sight. More and more people in this situation are taking advice and arranging an emergency debt relief loan to take care of all their debts. These companies will actually do more than just lend the money as they will also act on your behalf to ensure the loans are repaid and as options go they make a great deal of sense considering how volatile interest rates can be.

It is important to address the money problem before it escalates out of control, damaging your credit history and possibly leading to bankruptcy as well. People that require the assistance of emergency debt relief loans are invariably bad at controlling their finances and spending so it is not surprising that they resort to this action. Often the problem is just one of spiraling interest rates which cannot be controlled by the person in debt.

Once these emergency debt relief agencies are involved they can assist with negotiations with credit card companies and other debtors, sometimes helping to lower the amounts owed, thereby reducing the overall burden. Courses are also run for people in financial trouble to help them deal with their finances in the future by enabling them to set themselves financial targets that are more realistic. The purpose of these debt relief programs is to open negotiations and arrange settlement figures which can be managed whilst freezing the interest rates.

To ensure that a person's details are not sold to non-authorized companies and organizations, each state is governed by a fraud act which forbids divulging personal information. Getting out of a huge amount of debt is clearly challenging, but having the right information concerning an emergency debt relief plan will help a person fulfill their goal of becoming debt free in a relatively short period of time. Wherever possible in the future, cash must be paid for purchases which will bring home just how much money is leaving the account; other areas of credit need to be altered as well, which means the credit card is changed for one with a lower interest rate.

Each person knows exactly how much money is due for payment each month so must learn to keep a check on this spending then when spare cash is available, a little extra can be paid off; it is always a good habit to pay early and not wait for the final reminder each time. It is also possible to cancel all but one of the credit cards, preferably the one with the lowest rate of interest which will help reduce the interest payments on a monthly basis. This situation can take anything up to five years to clear but can be reduced if you are meticulous in your desire to end the debt problem and rebuild your credit history thereby putting an end to being in debt.

Benjamin Brook asked:


In a lackluster job market many people find themselves unemployed or underemployed often making far less money than when the started accumulating a lot of debt. Now that the income has shrunk and they are seeking some sort of debt relief consolidation may seem like a logical way out of their current dilemma. In the past, many companies offered their services to consolidate people's debt into one monthly payment, usually less than combined payments, but a few bad apples made a mockery out of debt relief consolidation and have faced charges of bilking money from people who could least afford to lose.

The concept of consolidating a person's debt is not new and has been used by many people to help them avoid bankruptcy and face the loss of their home, their car and more importantly their self-esteem. With debt relief consolidation, all of the person's individual debts are consolidated into one loan and a monthly payment is made on that loan until the debt is resolved.

Some companies, instead of offering loans, will contact lenders and negotiate for lower balances on the owed debt and then accept a payment from the debtor and make small payments to each creditor. In this type of debt relief consolidation, the individual accounts remain open and if the debtor opts out of the plan, in most cases, the balances revert back to their original amounts.

Some Debtors Have Been Taken For A Ride

Some of these companies have met with consumers and promised them all sorts of ways to get them out of debt. Typically, the debt relief consolidation service required an upfront administrative fee to get the ball rolling on their case and with promises of low down payments, people handed over their cash. It was not until their creditors continued to call them and tell them they have not received any money that the consumers became suspicious. Attempting to reach the company they may have found they went out of business and left town with their money.

When looking for a debt relief consolidation company, check with the local Better Business Bureau about any possible complaints against them and also check with the state Attorney General for any known problems. Also, when meeting with someone to discuss debt relief consolidation always make sure the fees and any administrative charges you have to pay are identified and spelled out in the contract. The fees could end up costing more than paying off the debt on your own.

Benjamin Brook asked:


For many reasons people may find themselves unable to pay off their debts and many loans such as those for cars and houses are secured by the lender holding the deed or title to the property. Most credit cards, medical bills and many other debts are not considered secured by any tangible property and finding unsecured debt relief may be is easy as filing for bankruptcy. This course of action may not, however be for everyone and they will have to explore other methods to find unsecured debt relief.

Obviously, the best way to find unsecured debt relief is to pay the bills on time, but that is not always going to be possible, especially when someone loses their job or suffers an illness that prevents them from working and paying their additional medical expenses. Many creditors are willing to work with people to lower payments or enable them to make interest-only payments until they get back on their feet and can resume meeting their obligations.

There are some legitimate debt consolidation companies that help with unsecured debt relief by contacting the debt holders and arranging payments on your behalf, often lowering the total monthly payment to be less than the aggregate total of all of the individual debt. Caution is required when choosing a company as some of them have been found to be less than honest in their dealings.

Trusteeship May Help Consolidate Debt Legally

Some folks may not be eligible for Chapter 7 bankruptcy, and seeking unsecured debt relief through the court may not be possible. However, with a Chapter 13 bankruptcy most petitioners can keep possession of their property under a court-ordered payment plan structured around their income and normal living expenses. Provided their income is high enough to make the monthly payments, they may qualify for this plan and through the court.

As a last resort, if their income is too low to make the payments and their living expenses, filing for bankruptcy may be their only alternative to find unsecured debt relief. Any secured loans they have will result in the loss of the property and any assets they hold above the state and federal exemptions will be forfeited to the court to help satisfy their obligations.

Meeting with a credit counselor is one of the best ways to insure they not only choose the right method of getting unsecured debt relief but also to prevent the situation for happening again.

Calum MacKenzie asked:


On December 20, President Bush signed a law that is meant to help homeowners who are facing foreclosure or who sell their homes in a short sale. Before this law, the Mortgage Forgiveness Debt Relief Act of 2007, if your bank or lender forgave a portion of your mortgage debt because the value of your home had decreased, the IRS treated the forgiveness as taxable income.

That meant that if your mortgage lender forgave $15,000 in mortgage debt because your house was worth $15,000 less than your remaining mortgage balance, the IRS treated it as earned income. When you filed your taxes, you were required to add that amount to your annual income and pay taxes on it at your regular tax rate. Just when you most needed a break, you ended up owing taxes on $15,000 in phantom income.

Not for the next three years. Under the Mortgage Forgiveness Debt Relief Act, taxpayers can exclude up to $2 million of forgiven mortgage debt on their principal residence in 2007, 2008 or 2009. If you're married filing separately, you can exclude up to $1 million in forgiven debt from your income.

What is mortgage forgiveness?

Mortgage forgiveness is a term that has become more familiar in the real estate market over the past couple of years. In essence, anytime that a lender accepts less than the full amount of the debt owed in full payment of a mortgage, the difference between the amount owed and the amount accepted is "forgiven".

Let's take a look at Sue and Jim. They took advantage of a great adjustable rate mortgage to buy a home for $350,000 four years ago. The payments were manageable until the adjustable rate did what adjustable rates do – and thanks to the changes in the housing market and the sub-prime lending market, they are now facing foreclosure. To make things even worse, the best offer that they can get on the home for which they paid $350,000 is $275,000. Although they still owe $330,000 on the mortgage, their lender agrees to accept the $275,000 as full payment of the remainder of the mortgage, forgiving $55,000 of the debt.

Under the Old Rules The IRS Gets Their Cut

When a bank or other mortgage lender forgives your loan or any part of it, they send you a 1099C in the amount of the debt forgiven. You are then required to count the amount on the 1099C as taxable income along with your earned income and wages. Sue and Jim from the paragraph above would have got a 1099C from their old lender. When they file their taxes for the year, that $55,000 would be added to their earned income, adding the insult of having to pay taxes on income they never saw. Instead of relief, they'd end up owing the IRS a hefty chunk of change at the next tax term.

The Mortgage Forgiveness Debt Relief Act Changes Everything

Well, not exactly everything. If you're forced into a short sale, you'll still get a 1009C from your lender, and you'll still have to file that with your taxes. Now, however, you're allowed to exclude the forgiven amount up to $2 million ($1 million if you're married, filing separately) from your taxable income. In other words, while it's still counted as income, you won't have to pay taxes on that amount of your income.

Who Qualifies for the Mortgage Forgiveness Debt Relief Exclusion?

According to the IRS, you'll qualify for this tax exclusion whether you mortgage debt is forgiven as part of a refinancing or if it's forgiven in connection with a foreclosure. In order to qualify for the exclusion, the following conditions must apply: The debt forgiven must be on a mortgage for your principal residence. The principal residence is qualified based on the amount of time that you lived in it over the past five years. The mortgage forgiveness must be because of loss of value in your home or because of a forced short sale in connection with a mortgage foreclosure. A forgiveness that is given in return for services performed for the lender is not allowed. The debt must be forgiven between January 1, 2007 and January 1, 2010. The debt forgiveness must be on the mortgage used to buy your home.

How to Claim the Debt Relief Exclusion

In order to claim the debt relief exclusion, you'll need to show the IRS how much of the debt has been forgiven. That will require some calculation on your part, because the IRS wants to see the fair market value of your home as well as the amount of your mortgage that was forgiven. Often, when the lender makes out the 1099C or 1099A, they may just put the value of the loan in the field that's reserved fair market value of the home. In some cases, the 1099C or 1099A may not include the fair market value at all.

Like your math teacher, the IRS wants to see your work. When you submit your taxes, you'll need to include documentation of the fair market value of the home as well as your calculations. If the fair market value of your home – the price that it was sold for – is not listed on the 1099C form, you may do best to hire an appraiser to document the fair market value.

The calculations can get complex if you've taken out home equity loans or a second mortgage on your home as well as the primary mortgage. In this case, special considerations may apply. For instance, the income exclusion only qualifies for "acquisition indebtedness"- money that's spent to buy your home, build a new home or that you use to make substantial improvements to your home.

Suppose you bought a house 10 years ago and paid $80,000 for it with a 100% loan. The Florida land boom was very good to you, and five years later your home had increased in value to $200,000. You took advantage of lower interest rates to do a cash-out refinance for $150,000, paid off the remainder of the original mortgage and pocketed $70,000. When time comes to sell, though, you can only get $100,000 for the property and your lender agrees to a short sale because the home has decreased in value, forgiving $50,000 of the loan amount. Can you use the Mortgage Forgiveness Debt Relief Exclusion to avoid taxes on the $50,000?

That depends, says the IRS, on what you did with the cash-out part of the loan refinance. If you used the money from the refi to pay college tuition or your daughter's wedding, then you'll have to pay taxes on the forgiven amount. If, on the other hand, you used it to make major improvements to your home, then it qualifies for the exclusion – but you'd better be able to prove the expenditures. If you're audited, you may need to provide your original warranty deed, or your HUD-1 form. You may need to show canceled checks, receipts and invoices to show the cost of improvements you made.

Filing For the Debt Forgiveness Exemption

The new law came at the end of the year, after the tax forms for this year had been printed, so you won't find anywhere on the tax forms to make the calculations you'll need to prove you qualify for the exemption. The IRS is suggesting that those who are facing a short sale or foreclosure this year use electronic tax preparation software. The private software companies have worked hard to update their own forms so that you can do all the necessary calculations within the software, then print out the results so that you can attach them to your completed tax return.