Free Credit Counseling

Debt Settlement-Tax Ramifications-What's The Real Deal?

        As you may or may not be aware one of the arguments put out by those opposed to debt settlement programs is that in the end you will not save money because you have to pay taxes on the portion of the forgiven debt. So here is the truth concerning this point.

        It is true that creditors are required to report forgiven debts in excess of $600.00 on form 1099 to the IRS. While it is required, it does not always happen. So, what about when it is reported. Well lets look at the facts. The fact that you are required to report the savings in the first place means that you saved a considerable amount of money. Additionally, the fact that you had to enroll in a debt settlement program also means that you are probably just getting by, even though you have thankfully resolved your debt or debts. That means that the great majority of people who settle their debts are not required to pay taxes on the forgiven part of the balance. That's because of the "insolvency" rule, described in IRS Publication 908, "Bankruptcy Tax Guide." Don't let the title fool you. You don't need to have filed a formal declaration of bankruptcy to take advantage of the insolvency rule.

        Insolvency basically means that you owe more than you own.It does not mean you are bankrupt, and it is easier to claim insolvency  than you may think. If you have enough equity in a home (or other property) to outweigh the total of your liabilities (debts), then you have a positive net worth, and will likely have to pay taxes on the forgiven debt amounts. However, the majority of people in serious debt trouble have a negative net worth, and are therefore insolvent. The way it works is that you can offset the canceled debt up to the amount by which you were insolvent at the time you did the settlement.

        Remember, your goal is to achieve self empowerment through debt freedom. If you are in a settlement program and need more information on this topic, please consult your tax professional for guidance.

Written By:
Steven Ciantro
Certified Credit Counselor
Member National Association of Credit Counselors
516-476-5903

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The Case For Debt Settlement

        With the proliferation of unsecured debt problems has come the growth

of debt settlement companies.  Much has been written on this topic, just as much has been written about Debt Management Programs, also known as credit counseling. Frankly, some of what has been written has been done to put out propaganda by both sides. What do I mean? Well, frankly, the non-profit industry, which is controlled by the banking industry, has had a vested interest in seeing debt settlement companies go away. They are looking to get all of the debt paid back, plus some interest, whenever possible.

        

           The non-profits would rather not have the competition, yes, they are businesses and please do not let anyone persuade you otherwise. Just like in any other business there are good and bad, and the good ones do serve a vital function. There is much more to debt settlement than just paying back less than you owe in lower monthly payments over time. There is a real psychological benefit to many of these programs, and a real benefit to the bigger economic picture.

       

          When most people are oppressed by a debt problem, it creates an imbalanced emotional situation, and eventually the debt takes over other areas of their lives, Things like work, people relationships, relationships with their children, and on and on. Not to mention, they tend to feel like disempowered failures. It does not matter that the debt has been caused by some unforeseen catastrophe, it only matters that they have lost control.

   

         Many of these people can no longer afford the high payments of a debt management program. The cost of gas, the devaluing dollar all have contributed to this widely expanding problem. Many people can no longer qualify for bankruptcy. What if they can qualify for bankruptcy, but opt instead for debt settlement, and so many people do. Ask yourself, why would a person who qualifies for a chapter 7 bankruptcy, where you get to just walk away from the debt, instead opt for a debt settlement program?

        

        I believe I know the answer. It gives people back control over there bad situation. How so, you ask. Well, when they enroll in debt settlement they are paying back about half of there debt, and doing so in affordable, regular, the key here is regular monthly payments. Yes, it is true that the creditors do not receive any money until a settlement is reached, but that is not the issue. The issue is that they are once again, establishing disciplined monthly payments and have a financial plan to resolve the debt. They feel better, because they have not chosen to simply give up and file a chapter 7 bankruptcy.

 

        Please do not misunderstand me, there are times when a bankruptcy is the only viable alternative, just as there are times when a debt management program is a best alternative.

      

        But, debt settlement definitely has its place. Not to mention, creditors are at least getting back some fair percentage of there money. If you enjoyed this article, please feel free to subscribe to the feed from this blog, the FREE credit counseling newsletter by visiting :http://freecreditcounselingblog.typepad.com/creditcounseling/

 

Written By:

Steven Ciantro

www.americandebtenders.com

Member National Association of Credit Counselors

Help@americandebtenders.com

 

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Tips On Defending Yourself From A Creditor Lawsuit

            First, a disclaimer. I am a credit counselor and not an attorney. So please do not use this article as legal advice. That having been said, in keeping with the theme of our newsletter, that being, to empower individuals to live free from the oppression of debt, I found an excellent source of information on this topic, and would like to pass it on. Before I give you the link, I would like to say a few words on this topic. Most debtors sued by credit card companies and car repossessions do not have the funds to hire an attorney. It is quite common for people to defend themselves from a lawsuit started by a creditor (credit card company, collector). The purpose of this article is to empower you to gain the necessary knowledge to defend yourself successfully. As an example, did you know that if you are sued for a deficiency judgment because of a car repossession ( deficiency means the car was sold for less than you owed), that if it was sold for to low a price this may be grounds for a successful defense of the lawsuit?

           The website I came across applies to New York City only, however, it contains a wealth of general information that applies to anywhere in the US.
The link is: http://www.nedap.org/hotline/clbasics.html .
  
           If you like this article and are not already a subscriber to our Free Credit Counseling Newsletter, you may subscribe FREE at: http://freecreditcounselingblog.typepad.com/creditcounseling

Written By:
Steven Ciantro
American Debt Enders
Help@Americandebtenders.com
Member National Association of Certified Credit Counselors

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Should I Speak To My Creditors When Enrolled In A Debt Settlement Program?

    Wow! What a great question, and unfortunately, one which I have not seen addressed in to many articles. The general answer is, it depends on the guidelines given to you by your particular debt settlement law firm or company. When you enroll in a debt settlement program, and hopefully, it is one in which you are represented by legal counsel, that law firm will have its own set of guidelines on how to handle your creditors. The settlement law firm or its customer service arm, will send out letters to each of your creditors advising them that you have enrolled in there settlement program and now represent you concerning these debts. Will this make the creditors stop calling you? Not always. The original creditor can still call you, as they are not bound by the Fair Debt Collection Practices Act. Many times, however, once they learn you have enrolled in a settlement program and are represented by legal counsel, they will stop.
Some will just wait out the one hundred and eighty day charge off period, while continuing to mail you statements and offers to settle, and some will continue to call you.

     After one hundred and eighty days of non payment by you, the account will charge off and either go to an outside collector or there own internal collections department. This is where you are protected by the Fair Debt Collection Practices Act, as the act applies to collection agencies which are not the original creditor, but rather have been assigned the debt or purchased it for less than full value. Often times, the collection company will have received the notification that you are represented by settlement attorneys, but just not bothered to look, or simply chose to ignore it.

     The Fair Debt Collection Practices Act says that collectors cannot call you once they have been notified that you are legally represented. In fact, there is a penalty of $1000.00 per call, if they violate and you can prove it. Unfortunately, I know of clients who have enrolled in excellent debt settlement programs but against the advice of the company continued to take calls from creditors. Unless you have been advised by your settlement company as to how to handle these conversations, it can be disastrous. I know of one client who allowed the collection company to take $200. from her checking account as a one time payment, even though the account was placed with a settlement law firm and she was paying them at the same time. What happened? Generally, there is no one time payment with collection companies. They went into her account each month for four consecutive months before she realized she had paid them $800.00. She actually was angry at the settlement company, even though they had no idea what was happening, because she failed to contact them to get advice before she gave over her checking information.

    Some settlement law firms actually will tell you that they do not want you to speak to creditors enrolled in there program at all. Just let them do the job you hired them for, and call them if you have a question. Some settlement law firms will actually void any warranties they gave you in writing when you enrolled, if you speak directly to your creditors.

   The bottom line is, few people are trained in how to handle creditor phone calls. Thats why you enroll in a debt settlement program. You need to let the experts work on your behalf, because the creditors are trained to use scare tactics, that in many cases are simply not even true.

    If you found this article useful and are not currently a subscriber to our Free Credit Counseling Newsletter, please visit: http://freecreditcounselingblog.typepad.com/creditcounseling/ and sign up for our free feeds from our blog.

Written By:

Steven Ciantro
American Debt Enders
help@americandebtenders.com
Member National Association Of Certified Credit Counselors
877-766-2465

This Two Pronged Approach Can Get You Back On Track Fast, Financially

    By now it should be quite clear to anyone reading this article that there is no government program that is going to bail anyone out of a financial crises. The bottom line,as I have written so many times, is that the key is self empowerment. In keeping with this line of rational and practical thought, I offer the following.

    If you are overcome by unsecured debt, whether it be credit cards,payday loans, retail store cards, deficiency judgments for car repossessions or medical bills and you would seriously like to try to regain control over your situation, first, speak with a credit counselor and see what programs may be available to you for dealing with the debt, outside of a bankruptcy. If the answer is a debt management program and that works for you, fine. Whether the answer is debt management or debt settlement may sure it is a program you can afford. Enroll in the program. First lets talk about if debt settlement is the program you selected. If it is, then most likely many of your accounts have either gone to collection or are about to.

  Once 180 days passes without your having made any type of payment to your original creditor, by law, the original creditor has to charge off the account. This is usually when the account is sent to an outside collection agency. Your credit report is noted account charged off, and the missed or late payments stop being reported. These missed and or late payments have of course lowered your credit score. Next, and here is part two of your two pronged approach, enroll in a credit restoration program at the same time or shortly after you enroll in the debt settlement program. That way, you can work on both eliminating the debt in an affordable manner and eliminate the missed payment negatives and late payments from your credit report at the same time. By the time you are finished with the settlement program, you stand an excellent chance of being well on your way to a higher credit score.

  If you are knowledgeable and have the time you can try he credit restoration part yourself. If not, may I suggest:  http://www.vrtechmarketinggroup.com/aciantro/ . American Debt Enders is an affiliate of this awesome credit restoration program. This recommended approach works. I have personally seen it work over and over. The most important aspect of insuring success is that above all else, you actually overcome inertia, and act.

Written By:
Steven Ciantro
Nifce Certified Credit Counselor
Member of the National Association Of Certified Credit Counselors
American Debt Enders
877-766-2465
Help@americandebtenders.com

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Why So Much Conflicting Information About Debt Settlement Programs?

       Depending on which article you read, Debt Settlement programs are either hailed or cursed. It is no secret that in recent years Debt Settlement programs have flourished, as dropout rates for Debt Management programs have increased. Lets take a moment to explore why views of debt settlement programs can be either vitriolic or praised by others.

       Imagine you are a credit card bank and making huge profits charging 29 to 35% interest along with nuisance fees like overlimit charges, late fees, and unrequested default insurance with as many holes as Swiss Cheese. Everytime someone charges , lets say, $5000. in revolving credit, and pays only minimum payments, you are reasonably assured of getting back five times what you disbursed in unsecured credit in a relatively short period of time. Armed with the knowledge and ability to predict default rates from FICO scores your business is booming. Couple this, with the fact that a number of years ago, as an industry, you had the brilliant idea of being able to rehabilitate credit users who got into trouble paying after you squeezed the last usurious dollar from them, by enrolling them into a Debt Management Program, which you created, to help loosen ever so slightly, the very noose you tightened.

        So for years, you, the banks are king of the hill. Suddenly, as americans use more and more credit because they are either living above their means, or have suffered a financial setback out of there control, default rates begin to increase. All of the non-profit debt management companies, completely controlled by you, and which are paid a handsome collection fee by you, are having unacceptable default rates, and not collecting as much money. Right about this time, the debt settlement industry wakes up and sees a huge opportunity. Bankruptcy laws tightened, largely at the behest of the banking industry, default rates increasing, consumers desperately  looking for help, all add up to what we have today as a very sophisticated Debt Settlement industry. Here, clients can hire legal counsel to represent them and do the settlement negotiations for them. Usually, creditors stop calling and for half the monthly payments that were going to the banks, the hard pressed debtor now has a way out. While the debtor would have to bite the bullet for a few years, in terms of a less than stellar credit report, there was a light at the end of the tunnel, called debt freedom.

    Is it at all surprising that the banks, non-profits and our state and federal regulators who allowed these usurious conditions to exist, are not fond of debt settlement companies? What about collection agencies? What might there take be on debt settlement companies. We already know that they like the idea of debt settlement. Why? Because they buy these charged off accounts from the banks for sometimes pennies on the dollar, and then, in a settlement, make there money back maybe ten times.
So, collection companies like settlement companies which have accumulated enough money to settle there clients accounts, but are not crazy about these companies, which charge a fee, but are not ready to settle, but also run interference for there clients until they are ready.

     This is the plain truth. Do not be bamboozled by some of the blustery  tones taken these days regarding settlement programs and settlement companies. Liking or disliking debt settlement programs is all a factor of which side of the fence you are sitting on. And, which side of the fence you are sitting on, does not change the fact that these programs do work and for many, are the only way out.

     If you would like to learn more about debt relief solutions and options, please subscribe to the newsletter feed from this blog, by visiting: http://freecreditcounselingblog.typepad.com/creditcounseling/ and leaving your email address. Your information is never shared, and if you subscribe, you will receive a free budgeting program to help you manage your money and remain debt free.

Written By:
Steven Ciantro
Nifce Certified Credit Counselor
www.Americandebtenders.com
Help@americandebtenders.com
877-766-2465

This article may be reproduced in its entirety providing the signature line and this permission line are included.

Debt Settlement Works, But don't Wait To Long

     If your debt is at the point where it is oppressing you or you do not see an end in sight, them it may be time to consider debt settlement as an option. Debt Settlement in recent years has grown up. A bad economy, coupled with outrageous usurious interest rates and ridiculous fees  charged by credit card banks which have become extremely aggressive in there marketing. Additionally, because banks are acutely aware that default rates are rising among credit card users, they have become only slightly more willing to accommodate your crises.

    If you are in a situation in which you have tried unsuccessfully to work things out with your creditors, do not waste me. If you cannot afford a debt management program, which is totally controlled by the banks but administered through non-profits, and do not want or are not eligible to file for a bankruptcy, then a debt settlement program may well be right for you.

    The very best debt settlement programs are administered by attorneys. So when looking for a settlement program, make sure you choose one that is administered by an attorney or law firm that specializes in debt relief. You also want to check the fee structure and make sure there are some type of prorated guarantees, so that, in the event you are forced to withdraw from the program, you can receive a refund, pro rated, based on the amount of work the firm has completed on your behalf. Each debt settlement  law firm will have its own set of criteria for accepting your accounts into their program. Basically, non of them will accept an account on which you have already been sued by the creditor or collection agent. Hence the title," don't wait to long". Some credit card banks have stepped up collection efforts for past due accounts. Some will forward your delinquent creditor card account to there in house counsel to start a judgment proceeding against you after 90 days. This is a major change from even two years ago, which is why I say, do not wait to long.

    If you are already enrolled in a good debt settlement program, and you are sued, then a good settlement company will advise you accordingly. Since the best settlement attorneys have relationships with collectors and creditors, they have some credibility and clout when they represent you. I cannot tell you how many people I have counseled with who have finally come to the point, after receiving a threatening letter from a collector to start exploring settlement programs only to find the collector has sued before they could finalize the enrollment process. Most settlement lawyers will charge a fee of about 15 to 25% of your debt which you will pay in monthly installments. Even with the fees the entire program including fees and settlement charges should not cost you more than about 55% of your total debt. Thats a pretty dramatic savings. Many of the better settlement companies also offer bankruptcy service, so even though you do not want to file a bankruptcy, it can be used as a viable threat against a creditor who does not want to cooperate, and afford you with an additional level of protection.

  If you would like more information on credit counseling and debt relief options, please feel free to subscribe to the newsletter feed from this blog at: http://freecreditcounselingblog.typepad.com/creditcounseling/ . The newsletter is free and your information is never shared. Please also feel free to contact the author using the contact information below.

Written By:
Steven Ciantro
NIFCE Certified Credit Counselor
www.americandebtenders.com
Help@americandebtenders.com
877-766-2465

This article may be reproduced in its entirety provided the signature line including this permission line is included.