What is Debt Relief?
Debt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth...
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If you or someone you know is in financial hot water, consider these options: realistic budgeting, credit counseling from a reputable organization, debt consolidation, or bankruptcy. Debt settlement is yet another option. How do you know which will work best for you? It depends on your level of debt, your level of discipline, and your prospects for the future.
Developing a Budget:The first step toward taking control of your financial situation is to do a realistic assessment of how much money you take in and how much money you spend. Writing down all your expenses, even those that seem insignificant, is a helpful way to track your spending patterns, identify necessary expenses, and prioritize the rest. The goal is to make sure you can make ends meet on the basics: housing, food, health care, insurance, and education.
Contacting Your Creditors:Contact your creditors immediately if you're having trouble making ends meet. Tell them why it's difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level.
Dealing with Debt Collectors:The Fair Debt Collection Practices Act is the federal law that dictates how and when a debt collector may contact you. Collectors may not harass you, lie, or use unfair practices when they try to collect a debt. And they must honor a written request from you to stop further contact.
Managing Your Auto and Home Loans:Your debts can be unsecured or secured. Secured debts usually are tied to an asset, like your car for a car loan, or your house for a mortgage. If you stop making payments, lenders can repossess your car or foreclose on your house. Unsecured debts are not tied to any asset, and include most credit card debt, bills for medical care, signature loans, and debts for other types of services
If you and your lender cannot work out a plan, contact a housing counseling agency. Some agencies limit their counseling services to homeowners with FHA mortgages, but many offer free help to any homeowner who's having trouble making mortgage payments. Call the local office of the Department of Housing and Urban Development or the housing authority in your state, city, or county for help in finding a legitimate housing counseling agency near you.
Find a Debt Solution Today
How is this different from debt settlement?
Provided by DebtGoal, founded in early 2008 out of frustration with banks that push products and measure success based on the number of products they sell to each customer rather than how well they help their customers reach their goals.
Bringing a new attitude to financial services, they decided to focus on the biggest financial problem facing Americans today: excessive consumer debt. About one-half of the U.S. households currently have more debt than they'd like and reducing debt consistently ranks as the top financial goal.
DebtGoal is targeted to borrowers who have the financial means to at least make minimum payments on their debt, but just need a simple tool to guide them.
DebtGoal makes getting debt-free as easy and efficient as possible, allowing users to create a comprehensive plan to organize, optimize and pay-down all types of debt.
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The Mortgage Forgiveness Debt Relief Act
If you owe a someone and they cancel or forgive that debt, the canceled amount may be taxable. The Mortgage Debt Relief Act of 2007 generally allows a person to exclude income from the discharge of what they owe on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the payer’s financial condition.
More information, including detailed examples can be found in Publication 4681. Also see IRS news release IR-2008-17. |
Mortgage Forgiveness Debt Relief Law
The federal law covers qualified debt forgiven from 2007 through 2012,1 and it:
- Limits the amount of qualified principal residence indebtedness to $2,000,000 for a person who file as married filing jointly, single, head of household, or widow/widower, and to $1,000,000 for a person who file as married filing separately.
- Does not limit the debt relief amount: it only limits the indebtedness amount used to calculate the relief amount.
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Advertisements Promising Debt Relief May Be Offering Bankruptcy
Washington, D.C. —
Debt got you down? You’re not alone. Get Relief! Whether your dilemma is the result of an illness, unemployment, or simply overspending, it can seem overwhelming. In your effort to get solvent, be on the alert for advertisements that offer seemingly quick fixes. While the ads pitch the promise of relief, they rarely say relief may be spelled b-a-n-k-r-u-p-t-c-y. And although bankruptcy is one option to deal with financial problems, it’s generally considered the option of last resort. The reason: its long-term negative impact on your creditworthiness. Bankruptcy information (both the date of your filing and the later date of discharge) stays on your credit report for 10 years, and can hinder your ability to get credit, a job, insurance, or even a place to live. The Federal Trade Commission (FTC) cautions consumers to read between the lines when faced with ads in newspapers, magazines, or even telephone directories that say: “Consolidate your bills into one monthly payment without borrowing.” “STOP credit harassment, foreclosures, repossessions, tax levies, and garnishments.” “Keep Your Property.” “Consolidate your bills! How? By using the protection and assistance provided by federal law. For once, let the law work for you!” You’ll find out later that such phrases often involve filing for bankruptcy relief, which can hurt your credit and cost you attorneys’ fees. If you’re having trouble paying your bills, consider these possibilities before considering filing for bankruptcy:
- As to credit, talk with your creditors. They may be willing to work out a modified payment plan.
- Contact a credit counseling service. These credit related organizations work with you and your creditors to develop repayment plans to help with credit and bring you relief. Such plans require you to deposit money each month with the counseling service. The service then pays your creditors. Some nonprofit organizations charge little or nothing for their services.
- Carefully consider a second mortgage or home equity line of credit. While these loans may allow you to consolidate your debt, they also require your home as collateral.
If none of these options is possible, bankruptcy may be the likely alternative. There are two primary types of personal bankruptcy: Chapter 13 and Chapter 7. Each must be filed in federal bankruptcy court. Filing fees are several hundred dollars. For more information visit www.uscourts.gov/bankruptcycourts/fees.html. Attorney fees are additional and can vary.
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