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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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.
Stop Moving Debt Around. Pay it off with DebtGoal. |
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The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable. The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt 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 taxpayer’s financial condition.
More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17. |
Mortgage Forgiveness Debt Relief Law
The California mortgage forgiveness debt relief law is effective immediately. It is similar to federal law, but with important differences.
The California law covers qualified debt forgiven in 2007 and 2008, and it:
- Limits the amount of qualified principal residence indebtedness to $800,000 for taxpayers who file as married/registered domestic partners (RDP) filing jointly, single, head of household, or widow/widower, and to $400,000 for taxpayers who file as married/RDP filing separately.
- Limits debt relief to $250,000 for taxpayers who file as married/RDP filing jointly, single, head of household, or widow/widower, and to $125,000 for taxpayers who file as married/RDP filing separately.
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 taxpayers who file as married filing jointly, single, head of household, or widow/widower, and to $1,000,000 for taxpayers who file as married filing separately.
Does not limit the debt relief amount: it only limits the indebtedness amount used to calculate the debt 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. Consumer debt is at an all-time high. Whether your debt 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 debt 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.” “Wipe out your debts! 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:
- Talk with your creditors. They may be willing to work out a modified payment plan.
- Contact a credit counseling service. These organizations work with you and your creditors to develop debt repayment plans. 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.
Debt Relief made simple with MyCreditGroup.com
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