Tag Archives: Credit card debt

IRS governing credit card debt forgiveness

 

credit card debt forgiveness

credit card debt forgiveness

It is very important to be informed about the laws related to credit card debt forgiveness. A person who is overwhelmed by his huge amount of debts may be thinking about different options to settle the account and live a debt free life. He can try to get in touch with the creditor and settle the account with them directly. It can really take the strain off the budget. There may or may not be some tax consequences associated with this process. Once the debt is forgiven, you will come to know about any tax consequences related with it.

When you are looking to settle your debt, you will talk with the creditor and try to settle the balance for a lesser amount so that it fits to your pocket. You need to be clever enough in putting the proposal to your creditor and see what he is willing to accept. You can get the debt amount lowered down to as much as 50 percent of the total credit balance.

Once your debt is settled, the creditor will send you a 1099-c form, which is also known as cancellation of debt form. In this form, you need to declare the settled debt as taxable income when you are filing your taxes. Say for instance, you have a debt of $10,000 and your creditor is willing to settle it for $6500, you have to report the difference of $3500 as income on your tax forms.

IRS

IRS

If you are lucky enough, you may not need to report your settled debt as a taxable income. In order to be exempted from this tax rule, you must have filed a petition for bankruptcy. Another way of getting exempted from this tax obligation is when your liabilities exceeds your assets, as stated by the IRS.

When you are trying to calculate your insolvency, get professional advice of a tax attorney for proper guidance. When the debt is settled for a lesser amount, it has a negative impact on your credit scores, which can go down by 70 to 130 points. Once you have paid off your debts, you need to work hard on rebuilding your credit ratings.

Resources:

http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre02.shtm

http://www.irs.gov/

Facts about credit card debt in America

credit-card-debt

credit-card-debt

Debt problems have become more similar like a baseball game in America. An average US citizen is keeping 5- 15 credit cards in their wallet and they are using these cards to make the smallest purchases. The society in US is changed from cash – savings society to a credit – debt society within a span of few years. Take a look at the following facts.

According to the Federal Reserve Board, the American households are reaching to a $2 trillion mark in debts. This is just excluding the mortgage debt.

On an average, one person in a US household is having at least $9000 of debt in one single credit card. So, if a typical household has 3 credit cards, that single family is having $27000 of debt.

What are the reasons for such a high growth of consumer debt?

The answer to this question is credit card companies offering credit cards to every single adult in the family. Previously, the credit card companies used to offer credit to only those people who are responsible and disciplined in making financial decisions. They knew that the person to whom they are offering credit will be able to repay his debts in a reasonable period of time. Nowadays, credit card companies are shoving these cards to almost everyone without reviewing his/her past credit history. There are companies sitting outside the college and offering credit cards to the students of the first year. It is expected that the students who have got a credit card for the first time in life will involve into impulsive purchasing habits by using a credit card. This is what most of the credit companies want when they offer a card to an 18 year old student. They know that s/he will get involved into a lot of spending habits and will rack up to $20,000 worth of credit card debt. He is expected to spend the rest of his life paying his credit card debts with high interests and fees. The story of the credit card debt in US starts from that age and has no end until your death, or is forced to file for bankruptcy or leave the country.

Here lies the importance of debt negotiation program to get rid of credit card debt problem. Debt negotiation plan can reduce your total amount of due to the credit card company with an easy installment monthly plan. So if you are having such problem then don’t waste time any more but go for a reputed debt negotiation company.