Have you had a debt settled for less than you owe?  If so, chances are pretty good that you also received a 1099-C for the amount of the "forgiven" debt amount.  WHAT?  How can that be possible? 

Unfortunately, if you settle your debts, the forgiven amount is considered taxable income.  However, you don't necessarily have to included it as taxable income.  Read on to hear Bob's story and how he was able to avoid paying taxes on his forgiven debt.

How to avoid paying taxes if you receive a 1099-C for FORGIVEN DEBT

Bob lost his job and started using several credit cards to make ends meet. He was paying for groceries, gas, and even had to take a cash advance once in a while to survive.Bob had every intention of paying off the cards, but due to our country's severe economic downturn, he could not find a job.

After about a year or so, he had added another $10,000 to his cards, making the total of all his credit cards to be about $22,000!The minimum payments on all of them totaled a little over $500 per month and he just couldn't meet his obligation.  After 3-4 months of non payment, most of his cards went into collections, debt collectors started

Bob had heard about DEBT SETTLEMENT and DEBT MANAGEMENT, but didn't know if he qualified.

After a FREE COUNSULING SESSION, it was clear that he could not qualify for the Debt Management Program and therefore chose to enroll in the Debt Settlement Program.

Let's see what happened during the Debt Settlement Program:

After searching the net and talking with several companies, Bob had chosen a reputable Debt Settlement Company to help him settle his debts.

His total debt was settled at an average of 40% of what he owed, so his creditors FORGAVE about $13,000 of debt.

Because the amount of the forgiven debt was over $600, Bob's creditor reported the settlement to the IRS and mailed him a 1099-C.  The 1099-C basically said that $13,000 had been forgiven and he needed to report that amount as additional income for the taxt year the forgiveness was granted.

But his Debt Settlement Company helped him understand that he was not going to be liable for the additional income and resulting tax on that income.

They provided him with a information about how to file IRS Form 982 and the other documents he needed to provide with his taxes.

IRS Form 4681, says that if, at the time of forgiveness, you were INSOLVENT (meaning your liabilities were greater than your assets), then the forgiven amount DID NOT HAVE TO BE INCLUDED as additional income!

Since Bob had completed an Asset vs. Liabilities worksheet, provided by his Debt Settlement Company, he was able to completely avoid any additional tax on the settlement or "forgiven" debt shown on the 1099-C!

If you have received a 1099-C and need help, we can help, please let us know!

Can a Debt Collector Garnish Wages or Other Income?

It depends... Debt collectors may or may not be able to garnish your wages or other income.

It depends on several factors:

• Type of income
• What state you live in
• What the debt is for

In most cases, debt collectors cannot garnish the following types of income:

• social security
• disability
• retirement
• child support, and
• alimony.

There are exceptions to this rule, so you must check your state's particular laws.

But, exceptions are usually not granted for federal (or state) taxes or student loans in delinquent or past due status.

As of May 1, 2011 (the same day as the death of Osama Bin Ladin), banks are required to review accounts for automatically deposited federal benefits (Social Security and Supplement Security Income, veterans benefits, railroad retirement, civil service retirement, and federal employee retirement) before they honor or allow a debt collector to withdraw money for a garnishment order.

If your bank receives a garnishment order, it is required to review your account for the previous two months and must protect any federal benefit AUTOMATICALLY deposited during that time frame or the current balance of the account, whichever is less.

For example, if you receive $1500 each month from Social Security benefits and an additional $1,000 a month in federal disability benefits, the bank would protect $5,000 or your current balance if it is less from garnishment.

Any amount above $5,000 in the account would be subject to garnishment.

Again, we are talking ONLY ABOUT RETIREMENT INCOME THAT IS AUTOMATICALLY DEPOSITED for you!  If you receive a check and deposit it yourself, this law doesn't apply.

And remember, this law is not going to protect you from money owed to the Federal or State Government or for back child support, so be aware.

If you are retired and have debt that has gone to collections, I recommend that you go to your bank and sit down with the manager or someone who really knows, and make sure you account is flagged as RETIREMENT INCOME ONLY.

If they will not honor your request, I'd look around for a bank that does.

At this time, Pennsylvania and Texas are the only two states that I am aware of that restrict wage garnishment.

In TEXAS, your wages are exempt or protected from garnishment EXCEPT FOR:

• Child Support
• Alimony
• Taxes
• Federal Student Loans

In PENNSYLVANIA, wages are exempt or protected from garnishment EXCEPT FOR:

• child or spousal support,
• obligations relating to a final divorce distribution
• back rent on a residential lease
• certain types of taxes
• student loans, and
• court ordered restitution in criminal matters

In other states, your wages can be garnished.  Usually, the amount is 25% of your net income, (after tax deductions).

Also, most states, like OREGON, have an amount of earned income, not retirement income that will be exempt from garnishment.  In other words, if you have a small income, it may be exempt from garnishment.

Bottom line....

If you have unsecured credit:

• Credit cards
• Store cards
• Personal loans
• Medical bills
• Non-Federal student loans

 OK, so some or all of your income may be exempt from wage garnishment, but you still need to deal with your debts!

What can you do about getting rid of that debt?

You have several options:

• Debt Consolidation
• Debt Management
• Debt Settlement
• Bankruptcy

But which Debt Relief option is best?

That depends on several circumstances.  Click here for a FREE CONSULTAION.

photo by: TJ Scenes

If you live in Texas and are having problems paying your debts, you have some specific protection from debt collectors that other states don't provide!

In other words, "DON'T MESS WITH TEXAS"!

What is the Texas Homestead Law?

Texas Homestead Law exempts your primary residence from creditors in bankruptcy as well as from debt collectors.

This includes a home or condominium as well as improvements such as:

• swimming pool
• hot tub
• barn
• water tower
• pumps
• roads
• and other affixed items

A Texas resident mus file a HOMESTEAD DECLARATION (form filed with the county recorder's office).

Essentially, a debt collect cannot file a lien against a homeowner's primary residence in order to attempt to collect an unsecured debt.

Can Wages be Garnished in Texas?

Again, residents of Texas have some advantages that other states don't have, in that a debt collector cannot garnishment wages for debt collection in Texas.

This DOES NOT apply to:

• Unpaid income taxes
• Alimony or child support
• Federal Student Loans

Employers can find information about wage garnishment limits and exemptions in Texas at:

www.twc.state.tx.us.

Texas provides some of the best protection from creditors of any state and allows those who are in financial trouble to seek relief through DEBT SETTLEMENT without the fear of wage garnishment and/or a lien on their homestead.

If you would like to know how to settle your debts for less than you owe, let us know!

photo by: Jamiesrabbits

The amount of debt the average American has been estimated to be close to $8,000! If you get behind on paying your debts, get ready to hear from DEBT COLLECTORS!

You must know your rights!

YOU DON'T HAVE TO PUT UP WITH DEBT COLLECTION CALLS!

When you get a call or letter from a debt collector, DON'T ADMIT TO THE DEBT, but instead, get the address of the collection agency.

Write a letter demanding that they know longer call you at home or at work.

Mail by certified mail so that you have proof that they received it.

If they continue to call, report them to your state's attorney general.

IF YOUR DEBT IS A FEW YEARS OLD, MAKE THE COLLECTOR VERIFY IT!

The statute of limitations on unsecured credit card debt varies from state to state.

In Oregon, it is 6 years. 

This means that if the debt has had no payments and/or activity for over 6 years, it must be removed from the credit report and in deemed "un-collectable".

When you request a verification of the debt, the collector must:

• Stop all collection activities
• Provide proof of original documentation that you indeed owe the debt

Many times a collector has purchased debts and may or may not be able to verify.  If this is the case, you may not have to pay.

IF YOU ARE RETIRED AND ONLY RECEIVE INCOME FROM RETIREMENT SOURCES, YOU ARE EXEMPT FROM GARNISHMENT OR LEVY.

Debt collectors love to scare seniors and/or retired persons!

If your income is from a State or Federal Pension System and the benefits are automatically deposited in your bank account, the bank must perform a 2 months "look back" if they receive a garnishment request from a collector.

This law went into effect on May 1, 2011.

Unfortunately, this only applies to DIRECT DEPOSITS and not normal deposits.

If you are retired, and only receive retirement income, sit down with your banking contact and see if they will "FLAG" your account in case of a garnishment request.

If they will not, find another bank!

IF YOU ARE FACING A LOT OF UNSECURED DEBT, A COLLECTOR MAY ACCEPT A SETTLEMENT FOR LESS THAN THE BALANCE.

This is called "DEBT SETTLEMENT", and it is done everyday to help people clear up past debts.

Debt Settlement can be done by anyone, but it takes time, patience and experience to get the best settlements.

If you need help in this area, let us know.

Making the choice between BANKRUPTCY and DEBT SETTLEMENT can be a daunting task.  The fact is, one is not the clear winner.  The option you choose will depend on several factors.

Here are some guidelines to determine whether Bankruptcy or Debt Settlement is the right choice for you. 

DON'T THINK OF BANKRUPTCY AS A "GET-OUT-OF-JAIL-FREE-CARD"!

As I research and blog about the debt settlement industry I'm in, I see too many sites that seem to say that Bankruptcy is an easy way to START OVER.

That statement is both True and false.

Before we look into when you should choose Bankruptcy over Debt Settlement, just remember this...

Bankruptcy is a statement that you cannot pay the debts you owe.  Say what you will, that is a hard thing to admit and can cause severe personal turmoil.  Although most people who have to seek bankruptcy protection from creditors do so as a last resort, it is still a very big and tough decision mentally.

DEBT SETTLEMENT IS NOT THE SAME AS BANKRUPTCY

Whether you qualify for a chapter 7 or 13 (personal bankruptcy), you are basically walking away from the debts you have incurred.  Your creditors get paid back very little, if anything on the money they originally loaned you with your promise to repay!

With DEBT SETTLEMENT, your creditors will get paid back approximately 50% of what you owe.  This is better for you because it shows that you made an effort and paid back at least a portion of what you owed.  Down the road, it will be easier for you to get credit when you need it.

BANKRUPTCY WILL SHOW ON YOUR CREDIT REPORT FOR UP TO 10 YEARS!

Make no mistake about it, bankruptcy will have an major affect on you and others!

You may not be able to rent an apartment for up to 2 years following a bankruptcy!

Many employment opportunities will not be available to you if you must state that you have declared bankruptcy in the past or if your prospective employer does a credit check!

Bankruptcy HAS A VERY NEGATIVE impact on your credit score!

In the long run, your credit and credit rating will not be as damaged through DEBT SETTLEMENT as it will be through BANKRUPTCY.

After a debt is settled, the credit reporting agencies:

• Experian
• TransUnion
• Equifax

...will show the debt with a $0 balance and "paid-as-agreed" or "paid-for-less-than-the-full-amount".

When your credit report shows that you have done something to take card of your outstanding debts, it will (believe it or not) start to improve rather quickly!

SO, DEBT SETTLEMENT IS ALWAYS BETTER THAN BANKRUPTCY?

NO!  Again, debt settlement companies that only offer debt settlement have to say that, but it is just not true!

Reputable Debt Settlement companies will discuss all of your options so that you can make the right choice!

After 10 years of helping people get out of debt, I have found that in 99.9% of the time, the client found themselves in severe financial trouble from several circumstances of which they had no control.  Such as:

• Loss of job and income
• Divorce
• Illness and/or disability
• Cut back on the hours of employment due to bad economy
• Forced retirement
• Fixed income that cannot keep up with inflation

At first, you use the credit cards to "JUST GET BY", with the intent on repaying them when things get better.  However, in many cases, things don't get better and now you cannot keep up with the minimum payments.  Then:

• Collectors start to call several times a day (HOW TO STOP CREDITOR CALLS)
• You may be served a SUMMONS demanding payment

You may qualify for a DEBT MANAGEMENT PROGRAM

In a Debt Management Program, you will...

• Have ONE MONTHLY PAYMENT (it may or may not be lower than the total of the minimum payments you now have)
• Have interest rates and late fees are usually lowered or forgiven
• Usually pay back all of your creditors in 48 months or so
• Have improved your credit scores after your balances are $0

But, they question is, can you afford the MONTHLY PAYMENT?

If not, then you need to look at DEBT SETTLEMENT:

• One monthly payment (a payment you can afford based on your circumstances)
• Creditor call slow down and stop
• Creditors are paid a percentage of the debt owed (avg. 50% plus or minus)
• Once your creditors have agreed to a settlement and it is completed, your credit report will show a $0 balance and start to improve

Ifyou cannot even afford the Debt Settlement payment, then you need to consult a BANKRUPTCY ATTORNEY, but be careful!  Not all attorneys specialize in bankruptcy and as the bankruptcy laws seem to always be changing, you must find one that is an expert!

STILL NOT SURE?  WE CAN HELP!  Give us a call at 1-877-492-4109 or simply click on the link below for a FREE Evaluation.

DEBT MANAGEMENT vs. DEBT SETTLEMENT - What's the Difference?

It's important to know that one program does not solve all problems.

If you are making the minimum monthly credit card payments, Debt Management program may be right for you.

Debt Management (also known as Credit Counseling) allows you to consolidate all of your unsecured debt into one low monthly payment and offers the following benefits:

• Pay less. Creditors will offer a plan to repay your debt at a reduced interest rate and in some cases, a lower payment.  Also, most creditors will wave late and over the limit fees AND bring your accounts back to current without making up those missed payments. This alone could save you thousands over the life of the debt!
• Pay off your debt faster. If you continue to just make the minimum payments, it could take you 20-25 years to pay off that credit card! In a Debt Management Program, you should be able to pay off your debt in three to five years, saving you thousands of dollars!
• Reduce your stress. Calls from you creditors STOP and you will have an end in sight.
• One, easy payment each month. You will have one monthly payment so you don’t have to juggle payments.

But, if you cannot afford the payment required by a Debt Management Program, Debt Settlement may be the answer.

Debt Settlement is a program designed for people:

• Who are delinquent or are starting to become delinquent on their payments
• Some or all of their debts have gone into collections or are about to be turned over to a debt collector.
• DO NOT want to file for bankruptcy

In a Debt Settlement Program, most people:

• Have a substantial reduction in their monthly payment
• Save thousands of dollars in both principal and interest
• Are DEBT FREE in 36-48 months
• and, AVOID BANKRUPTCY

DEBT SETTLEMENT CAN HELP WITH THE FOLLOWING:

• Credit Cards
• Lines of Credit
• Medical Bills
• Unsecured Loans
• Collections
• Repossessions

If you would like to learn more or if you have questions about these two options, our Debt Solutions Specialists are here to help.  Please give us a call at 1-877-492-4109 or simply click on the link below for a FREE COMPARISON of both programs based on your total debt!

You do not have to put up with abusive debt collection practices.

Debt collectors must abide by the laws spelled out in the Fair Debt Collection Practices Act (FDCPA) or could face severe fines!

The  Federal Trade Commission (FTC)  is the nation's consumer protection agency and has published guidelines for consumers that explains what a debt collector can and cannot do.

Here are just some of the most abusive debt collection practices and violations:

Calling you many, many times a day at all hours of the day!

A debt collector may not call you before 8am (local time) or after 9pm (local time), unless you have agreed to it.

The best thing you can do to put a STOP TO DEBT COLLECTORS CALLS, is to send them a letter that demands that they stop calling you both at home and (if employed), your employer!

It is a good idea to send the letter via certified mail so you have proof that they received it.

You should also keep a copy of the letter.

The debt collector may only contact you once more to tell you they received the demand letter.

If they continue to call, you should report them to your state attorney general's office by going on line to file a complaint.

You should keep a log of all calls, time of day, etc.

A debt collector cannot discuss your debt with neighbors, family or friends without your consent!

A debt collector can only contact others to find your address, phone number or where you work.

Harassment!

• Debt collectors are prohibited from:
• using obscene or profane language
• making many, many annoying calls (many times via computer dialer)
• using threats of violence
• making false statements, such as threatening a legal action if they do not follow through
• falsely claim to be a government agency
• threaten to seize, garnish or sell your property to pay the debt (unless they have been awarded a legal right through the courts)

 What can you do if a debt collector has been awarded a judgment against you?

You may want to get advice from an attorney (yes, expensive), but it is VERY IMPORTANT that you don't ignore a summons, notice of levy or garnishment.

Once a debt collector has been awarded a judgment, they can apply for a writ of garnishment and also for a levy of your bank accounts.

The best thing you can do is to contact the debt collector immediately after receiving a letter and do you best to settle the debt.

Debt Relief NW can help you:

• Stop collection calls
• Negotiate debts for 50% or less in many situation
• avoid garnishments and bank levies
• avoid bankruptcy

FOR A FREE CONSULTATION WITH NO OBLIGATION, CLICK HERE TODAY!

If you find that your debt is out of control, it's always good to get back to the basics.   

DEBT CONTROL BASICS:

A)  DON'T BE A VICTUM OF "EASY CREDIT TERMS"!

We have all been at the check out stand and the sales person asks if we would like to get an instant 20% off the purchase.  All we have to do is just take a few minutes to fill out an application for their store card.

Sounds like a good deal, right?  WRONG

Most of the time, store cards are not a good idea. Let's say that your bill is $100 and with the 20% off it is only $80.  Nice savings.  I bet you are starting to feel like an Extreme Couponer! 

However, if you don't pay the remaining $80 off within 30 days and just pay the minumum payments, you could end up paying 2-3 times as much to finally pay off that card.  Not only that, but store cards often come with high interest rates.  Frugal shopper beware!

B) DON'T BUY SOMETHING IF YOU CAN'T AFFORD IT!

I know this sounds simple, but most people get in trouble with their credit as result of spending way beyond their means!

Here's what happens:

You already have a couple of credit cards charged up to about 70%-80% of the credit limit, and you are making the minimum payments each month without too much effort.

You "really need or want" that item and tell yourself something like "It would only increase my monthly payment by $20 and I can handle that."

                               WARNING!     WARNING!    WARNING!

• Your credit limits will start to be maxed out and that will result in a higher CREDIT RATIO.  Your credit score will decline.
• By the time you repay these cards making minimum payments, you could end up repaying 2-3 times as much as the current balances!
• If you should have a severe financial setback, such as Unemployment, Divorce or Major Illness, you could be in real trouble.

C) CONSIDER A DEBT MANAGEMENT OR DEBT SETTLEMENT PROGRAM.

If you find yourself starting to get into financial trouble because of TOO MUCH DEBT, consider a DEBT MANAGEMENT PROGRAM or a DEBT SETTLEMENT PROGRAM.

DEBT MANAGEMENT is a program designed to:

• Combine all of your payments into ONE PAYMENT.
• Reduce the interest rates and fees.
• Help you pay off all of your cards in about 48 months

But, if you do not quality for a DMP, you should consider a DEBT SETTLEMENT PLAN:

• One monthly payment much less than all of your current minimum payments
• May reduce your balances by 50% or more
• Avoid bankruptcy

If you would like a FREE CONSULTATION with NO OBLIGATION, CLICK HERE!

We all know that using White Out on your credit report won't really fix anything.

Here are a few tips on how to dispute errors on your credit report.

The Fair Credit Reporting Act (FCRA) is a federal agency that promotes the accuracy and privacy of information on consumer's information on the nation's credit reporting agencies.

We are entitled to a FREE CREDIT REPORT once every 12 months (or if you are rejected credit).

You can also call 1-877-322-8228 to order a Free Report or request it by mail:

Annual Credit Report Request Service

PO Box 105281

Atlanta, GA 30348-5281

If you find errors or want to dispute items, you must write or go on line to each credit reporting agency.  Going on line is the easiest and quickest method. Here are links to each of the major reporting agencies:

• Experian
• Equifax
• TransUnion

Basically, you must be able to prove that the information is inaccurate. For example, let's say that you had an old credit card account that was charged off and then wound up with a collection agency.

After being contacted by the collection agency, you were able to negotiate a settlement of the account. Even though you have settled the account, it is still showing a balance.

How do you dispute the error on your credit report?

You will need to provide a copy of the SETTLEMENT AGREEMENT.  Please don't tell me you didn't get the agreement in writing! 

Many consumers will agree to a settlement or repayment plan over the phone, authorize check-by-phone or other form of payment without a written agreement! If this is the case for you, all is not hopeless.  You should be able to find proof of payment from your bank.  So, you will need the SETTLEMENT AGREEMENT and PROOF OF PAYMENT.

The Credit Reporting Agency must contact the creditor or collection agency with the dispute, and you should be able to go online and check up on the progress.  This process will take 30 days or more, so you will need a little patience!

WHAT ABOUT OLD ITIEMS!

Even if you have legitimate, negative items on your report, those items can and should be removed after seven years (or shorter if the statue of limitations in your state is shorter). The same is true for judgments, however, a bankruptcy can stay on a report for up to 10 years.

If you have old, legitimate negative information that older than the statute of limitations in your state, you should dispute it and have it removed!

If all of this sounds like a "little to much" for you to handle, we can help!

Negotiating older, delinquent debts can save you THOUSANDS OF DOLLARS and improve your credit report and score.  Find out how by clicking the link below!

If you have settled a debt or had a debt, you may receive an IRS Form 1099-C.  This doesn't necessarily mean that you will have to pay additional tax on the amount "forgiven".  Here's what you need to do:

You received this form because a Federal Government agency or an applicable financial entity (a lender) has discharged (canceled or forgiven) a debt you owed, or because an identifiable event has occurred that either is or is deemed to be a discharge of a debt of $600 or more.  If a creditor has discharged a debt you owed, you are required to include the discharged amount in your income, even if it is less that $600, on the "Other income" line on your Form 1040.

However, YOU MAY NOT HAVE TO INCLUDE ALL OF THE CANCELED DEBT IN YOUR INCOME (capitalization mine!).  There are EXCEPTIONS AND EXCLUSIONS, such as BANKRUPTCY or INSOLVENCY see Pub. 4681...for more details.

Most people who have had debts settled (forgiven) have gone through a very hard time, financially. And, most people who have had debts settled would fall into the catagory of INSOLVENCY, according to the IRS and several publications.

The bottom line is, if AT THE TIME OF SETTLEMENT your liabilites were greater than your assets, you were insolvent and therefore the amount of debt forgiven would be excluded.

We have helped hunderds of our clients to become DEBT FREE through DEBT SETTLEMENT, but we also have assisted them in AVOIDING (or paying very little) ADDITIONAL TAX after receiving a 1099-C.

We have put together a complete 1099-C Kit that will show you (and/or your tax preparer) how to fill out and file the proper forms.

CLICK HERE to get you FREE 1099-C KIT