Debt Settlement Tips How To Negotiate With Your Creditors

Can you get a loan to payoff negotiated debts? What taxes do you have to pay on settled bills?

Simple debt settlement tips can help you negotiate with your lenders, get a debt settlement loan, and determine the taxes you will have to pay even if you feel intimidated when dealing with creditors.

Are you drowning in debt and desperate for help, but don't know where to begin? The following information will provide you with some basic guidance and answers to important questions.

 

Debt Settlement Tips: Status of Debt?

First, find out if the creditor has already "charged off" your debt. This basically means that the lender "writes off" your account as bad debt and will consider it a loss of revenue. Many times, creditors will choose to do this because the amount owing is not worth the collection costs involved.

Creditors will typically send a notice informing you of this action, and you will usually have to claim the written off debt as income on your tax return. If this is the case, then the debt is legally dead and you already paid taxes on the income, so you can move on to the next debt that needs to be paid off.

Debt Settlement Tips: Statute of Limitations

Before trying to negotiate a debt, find out what the Statute of Limitations are in your state.

There is a specific time limit during which creditors can file suit to collect a debt, and the laws governing this period vary from state to state.

The original creditor or collection agency cannot collect from you if the Statute of Limitations (SOL) has passed; however, they will still try in the hope that you are unaware of these laws. If the SOL has expired, you must inform bill collectors so they will stop harassing you about uncollectible debt.

Past due debts are usually removed from your credit report after 7 years. If the debt has not been paid on anytime within the last 7 years, then it cannot legally remain on your credit report, so you can challenge the listing to have it removed.

It is important to note that the amount of time a late payment or delinquent account can remain on your credit report is different from the Statute of Limitations. A debt may be canceled from your credit report after 7 years; however, a creditor can still sue you for the amount if the Statute of Limitations has not passed.

Basically, you can consider yourself free of the debt only when the Statute of Limitations has expired. When this time limit has passed, your debt becomes uncollectible and will disappear from your credit report. However, if a creditor/debt collector try to collect, you should then put them on written notice the SOL has expired and the debt is no longer collectible.

If the Statute of Limitations has not passed, then you need to find an alternate way to deal with your debt. Paying off debts can be so time-consuming and intimidating that many people would rather enlist the help of a Consumer Credit Counseling Service (CCCS). However, you can often negotiate a much better deal if you handle the situation yourself or use a reliable debt settlement company.

CCCS vs. Settlement

Although CCCS will devise a repayment plan and deal with creditors on your behalf, they usually do not negotiate how creditors will report your account to major credit bureaus, meaning your credit report could be ruined.

Debt Settlement Tips: With debt settlement, you can often ask creditors to report your debts as "paid in full" or list the account as "current".

With an increasing number of people seeking debt relief programs, you can often work out a debt settlement agreement that will reduce outstanding balances by 25-50%, or more. Once an agreement is reached, your account will be closed and a payment plan will be developed so you can begin your goal of getting out of debt.

Debt Settlement Tips: Depending on your situation, you may qualify for a debt settlement loan so you can payoff creditors.

Lenders are more willing to negotiate a reduced balance payoff if they know they will receive immediate payment, so your ability to secure a debt settlement loan may give you leverage when dealing with creditors. It is also a great way to get out of debt quickly because you make only one monthly payment that will be much lower than your pre-settlement budget.

Facts About Past Due Debt

You need to be aware of the risks connected with overdue debts.

A creditor can take legal action against you, and if they win the lawsuit, the lender may garnish your wages or have your property seized.

Credit card companies do not typically take this action because suing would be too expensive and require too much time. However, the possibility does exist, and the higher your balance on a single account, the greater the chance that legal action will be taken.

Debt Settlement Tips: Many people consider bankruptcy prematurely, before exploring other available options.

Because collection agencies use fear tactics and threaten garnishment or property repossession, people falsely believe that bankruptcy is the only solution for their situation.

However, creditors and collection agencies fail to mention that they cannot legally take any action without first going to court and being granted permission to carry out their threats. Being well-informed will prevent you from making hasty or unwise decisions.

You need to weigh the risk of garnishment, judgment,or property seizure against the likelihood of these things actually happening. Remember, since your are the one that will ultimately have to deal with the consequences of any risks, the decisions made should be completely in your hands.

Debt Settlement and Taxes

If a creditor forgives more than $600 of the principal, the forgiven amount must be reported to the IRS. You are required to include the "written off" amount as income on your tax return. Each creditor you settled with will send you a U.S. 1099 Tax Form stating how much you have to claim, which essentially, is the difference between the amount you paid and the amount you owed, as well as any applicable interest.

Although the additional income may increase your taxes, it is usually far outweighed by the benefits gained from large debt reductions:

Debt Settlement Tips: If you paid $200 to settle a debt of $1,200; the 1099 will be for $1,000. If your U. S. tax rate is 15%, this means you will only pay $150 in taxes for the write off of $1,000. Well worth doing!

Not sure if you want to handle the contact and negotiations? Go with reliable debt settlement companies to do it for you.
Original source: http://www.debtsteps.com/debt-settlement-tips.html

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