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Debt reduction


Forum: Financial Planning and Budgeting

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  #1  
July 30th, 2010, 01:50 AM
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My hubby has a massive amount of debt out there. Most of it was accrued before we married. Payments totalling 1500 a month, minimum payments. We cannot afford that. He just lost one of his part time jobs, he had two part time jobs, and I work full time.

Does anyone know about debt reduction, and do you pay taxes on the amount they reduce? My hubby wants to pay them back, but right now with the terrible job market here and companies closing, that is what happened to one part time job, no one is hiring. Was thinking maybe we could reduce the debt and make those payments if they were alot less.

Please help!
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  #2  
July 30th, 2010, 01:53 PM
Lynsann's Avatar Platinum Supermommy
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I honestly don't know, but there are some ladies on this board that know a lot about this stuff. Have you contacted the companies that your dh has debt with and talked to them each? Sometimes, if you offer them a lesser amount than what you owe, they will agree to that settlement. Good luck. I'm sure someone will come along with some good advice.
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  #3  
July 30th, 2010, 04:21 PM
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Yeah I agree. You need to call those companies and see if they will be willing to work with you on reducing the debt, problem is you typically need cash in hand to do that. For example, if your debt with company X is $2,000 you offer to pay them $1,000 cash now if they erase the extra $1,000 and then you're done with them. They *usually* won't lower it and continue to have you make payments.

What is the debt on? Student loans, credit cards, loans, etc?
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  #4  
July 31st, 2010, 04:59 PM
ashleighgurl's Avatar Loving Wife and Mommy
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I was also going to suggest talking to the companies directly and seeing if they will reduce the amount.
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  #5  
August 1st, 2010, 04:09 PM
mommy2Breana+Brandon's Avatar Platinum Supermommy
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If you settle yes you have to pay taxes on the amount that you don't pay

They look at it as income
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  #6  
September 5th, 2010, 08:12 AM
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I would at least call them and see if you can lower the monthly payments if you can't make the minimum. Many banks seem to be working with people right now because of the economy. I hope you were able to work something out.
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  #7  
September 5th, 2010, 02:49 PM
LoveTheStork's Avatar Regular
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Quote:
Originally Posted by faith4hope4 View Post
My hubby has a massive amount of debt out there. Most of it was accrued before we married. Payments totalling 1500 a month, minimum payments. We cannot afford that. He just lost one of his part time jobs, he had two part time jobs, and I work full time.

Does anyone know about debt reduction, and do you pay taxes on the amount they reduce? My hubby wants to pay them back, but right now with the terrible job market here and companies closing, that is what happened to one part time job, no one is hiring. Was thinking maybe we could reduce the debt and make those payments if they were alot less.

Please help!
•Put away your credit cards and make a comittment to yourself to not use them. If you don't think you can kept the pact you've just made with yourself, give them to a friend or relative to hold. Or better yet, cut them up. The thing you don't want to do is cancel your accounts, as closing accounts which are old (accounts which are 60 months old are valuable) can have a negative impact on your credit score.
•Pay off your highest interest rate card first, paying a little more than the minimum. This will shave months off your debt. With your other debts, continue paying just the minimum. After you finish paying off your highest interest rate card, move on to the 2nd highest interest rate card. Roll over the amount you paid each month from your first card to pay off this one. Don’t be tempted to use the money elsewhere! You must stay disciplined. You’ll pay off the second card even more quickly. Continue this strategy until all your debts are paid.
•If you find yourself unable to pay your bills, communicate with your creditors! Be honest, and explain your financial situation. Ask them to reduce your payments or the interest rate. Tell them you plan to pay off the debt. The worst thing you can do is not communicate. They may assume you are unwilling to pay your bills and get nasty.
•Apply for a low interest rate credit card and transfer your balances. Yes, there are still some of these cards out there. There are several excellent sites on the web to find such cards. one is Mortgage Rates Credit Cards Refinance Home CD Rates by Bankrate.com. A word of caution: Be suspicious of cards with a low-interest rate cards introductory period. (Lucky you, if you qualify for one!) Read the fine print before you apply.

What they don’t tell you is that most of these cards jump back up to a high interest rate after 4 to 6 months. Then you’re back to where you started or even worse! If you do get a card with a low, introductory rate, have a financial plan about what to do when the rate and your payments increase so you won’t be caught off guard.

•If you own your home, you might consider a debt consolidation loan. This kind of loan is a 2nd mortgage on your property which allows you to consolidate your debts into one payment. Some loan programs require no equity or appraisal. You can use this loan to consolidate credit card bills, car payments, or any other bills. Interest on this loan may be fully tax deductible depending upon your situation. Consult your tax advisor. As with any home loan, this is a lien on your property. If you sell your home, you must pay off both your 1st and 2nd mortgages. In addition, although you may be making lower monthly payments, you may be paying for a longer time period than if you paid off each individual debt.
•Make an appointment to see a credit counselor. You should be able to find a free service in your area that will help negotiate payments with your creditors, and give you good financial advice. You can find one National Foundation for Credit Counseling. They’ll give you a fresh perspective on your financial burden, and help you realize you’re not the only one dealing with debt. They’ll also be candid with you and tell you whether or not you should consider bankruptcy as an option.

Note: I have heard from people who have had both good and bad experiences with this approach, so be careful. Ask the company you contact what happens to your credit if you use their services. Is it difficult to re-establish credit after using their services? Many people I have heard have had a bad experience so try to do all this yourself if you can.Call your debtors, and get their feedback too.

"Creditors and debt collectors who agree to accept at least $600 less than the original balance are required by law to file 1099-C forms with the IRS and to send debtors notices as well. Taxpayers must report that "income" on their federal income tax returns. "
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Last edited by LoveTheStork; September 7th, 2010 at 05:53 PM.
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