The struggle to pay off debt is often times overwhelming for many folks who live paycheck to paycheck. Unexpected costs pop up and in order to avoid a cash advance, juggling costs will occur. Late payments the best way to protect credit, but it is also the slightest infraction if something has to give somewhere. When the juggling of income becomes a way of life and the struggle to make ends meet becomes too difficult, people end up missing payments altogether.
It is easy to say that all anybody has to do is cut back on expenses; but actually, there are many people who end up in this position who have already cut their expenses down to the bare bones. There are some emergency financial situations which make it extremely difficult to recoup. Loss of work or medical bills will ruin the attempts to juggle anything. Once finances reach a certain point, it becomes very difficult to bounce back.
A cash advance lender will sell defaulted loans to collections.
Creditors and lenders will try for only so long to collect the debt. Most often the time limit is 180 days given to a debtor to pay before it goes to collection. Settling debt is something some people hope for. When debt is settled, the party collecting is willing to settle for a part of what is owed rather than possibly losing it all. There are debt settlement agencies which will work to settle all credit card debt for a cost. It is one other option rather than working with debt collectors. There are many debt collectors which will work at settling debt as well. Credit companies are willing to take as much as they can when they face losing everything. Medical agencies, student loans, cash advance lenders and any military debt will not work with settling agencies. People are expected to work directly with their debt.
In all the excitement of the possibility of owing less to creditors, the tax repercussions of forgiven debt are often ignored. Short-sales are forgiven under the Mortgage Forgiveness Debt Relief Act, but credit card accounts are not. If the amount forgiven is less than $600 then individual will not have to worry; but anything over $600 of forgiven debt, a creditor is expected to file Form 1099-C to the IRS. There are significant new reporting requirements for cancelled and settled debt. Once the debt is reported to the IRS, the debtor receives Form 1099-C to fill out. Unless a person feels like battling the IRS,(which is not a good idea by any means) this form is not to be overlooked. The IRS looks at discharged or settled debt larger than $600 as income. The amount of forgiven debt is to added to gross income and taxes will need to be paid. This creates another problem for the individuals who sought relief from credit debt in the first place. Now folks will struggle to pay the extra tax liability.
If you receive a form from the IRS, don’t panic. The first thing to do is to find out if you qualify for an exclusion or an exemption. It’s complicated so work with a professional during this process.
Do what you can to juggle your money before disaster strikes. When you struggle to pay medical offices, cash advance lenders, student loans and yes even credit card companies, communicate your problem before you start missing payments. You would be surprised at how many will work something out with you to keep the worst from happening.
