Pacific Debt Blog

Paying Your Mortgage with Your 401k

Paying Your Mortgage with Your 401k

If the company you work for offers a 401K retirement plan and you’ve been faithfully paying into it on a regular basis, you’ve probably got a tidy sum of money. It’s really tempting to look at that money at 29 or 39 years old and think of all the things you can spend it on. This is especially true when you are facing possible foreclosure on your home mortgage. Should you use those retirement benefits to keep your house or even to pay off your mortgage?

The 401k

The 401k, a retirement plan offered through many employers, is one of the most valuable assets you have. The money that funds the 401k is tax-advantaged. That means that all the money going into your plan is taken out of your paycheck BEFORE taxes. This means that you pay less in taxes on your take-home pay. This saves you money now. You also do not pay taxes on the earnings on your 401k. Once you retire and start taking out money, you do pay taxes on that 401k money. However, since your tax bracket has probably dropped, you’ll likely pay less in taxes.

The kicker comes if you withdraw money before retirement. You get to pay both taxes and penalties for taking out that money. Before you withdraw money from a 401k, always discuss it with a tax professional, like a CPA!

*** We are not tax professionals and are not giving tax advice. Before you make any financial decisions, we encourage you to contact a tax professional.**

The 401k Mortgage Dilemma

Your house is probably the single largest physical asset you’ll ever own. Tax professionals report that many people consider using their 401k to pay down their mortgage, especially if they are 59-½, and give themselves more money each month. The answer, for most people, is that it does not make sense to pay the taxes and penalties. However, if you are in this situation, talk to a tax professional.

If you are facing foreclosure, you are in a slightly different situation and may be able to use your 401k to keep your home from being foreclosed. Foreclosure puts a huge hit on your credit report, and it may be years until you recover financially. If you are in this position, here are some things to consider.

Using Your 401k To Pay Off Your Mortgage

Your 401k can be used for financial hardships. If you are still employed by the company and are either 59-1/2 or in financial hardship, you can take out enough money to cover the amount to bring your mortgage current plus the amount for taxes and penalties. The IRS charges 10%, so a $5,000 401k hardship withdrawal will cost you $500, plus taxes.

In order to use your 401k, you need to fall into specific categories.

  1. Do you still work for the company where you have your 401k?
    1. Yes – go to number 2
    2. No – go to number 3
  2. Are you facing foreclosure or are at least 59- ½?
    1. Yes – You can take out money
    2. No – You cannot take out money without significant taxes and penalties
  3. You no longer work for the company or are under 59-½
    1. Yes – you may take out money but may face taxes and penalties

The often-unrealized penalty for early withdrawal is the decreased earning power that your 401k will have. The money that you withdrew will not be there drawing interest. This may not affect someone early in their career but can financially harm someone at the end of their expected working life.

Another wrinkle to consider is that your 401k is protected from creditors. Your home equity is not 100% protected.

Speak to a Pacific Debt Specialists for FREE to hear your options.

An Alternative to Using a 401k to Pay off A Mortgage

Your 401k may allow you to take out a loan against 50% of the vested account balance. This option requires you to repay the loan within 5 years. This has some advantages, so talk with a tax professional to make certain you can repay the loan and that the advantages work out in your favor.

What If You Use IRA To Pay Off Mortgage?

An IRA is another type of retirement account. Like the 401k, it can be used under certain situations. BUT most tax professionals advise strongly against it. The taxes may eat up most of your withdrawal, the withdrawal may push you into a higher tax bracket, and you may end up owing the IRS money.

Pacific Debt, Inc.

If you are facing foreclosure and have more than $10,000 in credit card debt, contact Pacific Debt, Inc. We may be able to help you become debt free in 2 to 4 years. We have settled over $250 million in debt for our customers since 2002.

Pacific Debt, Inc is accredited with the American Fair Credit Council and is an A+ member of the Better Business Bureau. We rate very highly in Top Consumer Reviews, Top Ten Reviews, Consumers Advocate, Consumer Affairs, Trust Pilot, and US News and World Report.

Pacific Debt is currently providing debt relief coverage in the following states:

Alabama, Alaska, Arizona, Arkansas, California, District of Columbia, Florida, Iowa, Idaho, Indiana, Kentucky, Louisiana, Massachusetts, Maryland, Michigan, Missouri, Mississippi, Montana, North Carolina, Nebraska, New Mexico, New York, Oklahoma, Pennsylvania, South Dakota, Texas, Utah, Virginia, Wisconsin

For more information, contact one of our debt specialists today. The initial consultation is free, and our debt experts will give you all your options.

Can You Pay Your Mortgage with Credit Card

Can You Pay Your Mortgage with a Credit Card?

The short answer to ‘can you pay your mortgage with a credit card’ is probably. It depends on the terms of your credit card and your mortgage holder. Since these are considered debt-for-debt transactions, credit card companies are wary of them. The more appropriate question is SHOULD you pay your mortgage with credit cards? Well, lets answer that question in a few paragraphs.

Why Would You Use a Credit Card to Pay Your Mortgage?

You might choose to use your credit card to pay your mortgage for several reasons. One is the rewards you accrue for using your card. Another is if you are temporarily short of cash. However both situations can definitely put you in a financial bind.

Can I Use a Credit Card to Pay My Mortgage?

It depends on your credit card network, credit card issuer and mortgage lender. In general, Wells Fargo credit cards can be used as long as the mortgage holder accepts credit card payments. American Express does not allow mortgage payments on their credit cards. Visa allows you to use debit or prepaid credit cards to pay your mortgage. Mastercard allows you to use either debit or credit card to pay your mortgage. However, these are NOT cut in stone. Always check with both your credit card network and your credit card issuer

The mortgage lender is the next hurdle. The lender may be willing to accept credit card payments that are processed through a third-party payment service provider. These third-person providers charge fees, often of 2.5% of the mortgage payment, every time you use the service. Those fees can offset any rewards that you might earn for using your credit card.

The other issue is if you don’t pay off your card in full each month. The interest rates and credit card fees will eat up any reward you might get. See our sample below for more details.

Monthly Mortgage Due: $1000
Typical Reward (2%): + $20
Third Party Processing Fee (2.5%): – $25
Average Monthly Interest Rate (1.16%): – $11.16

Using a third-party payment processor, if you don’t pay off your card in full, the $20 in rewards will be eaten up the first month by the processing fee and monthly interest rate.

Before you pay a mortgage using your credit card, contact the card network, the card issuer and the mortgage lender to make certain that the payment will go through. Otherwise, you’ll end up with late fees and other consequences for late or missing payments.

Should You Pay Your Mortgage with Credit Cards?

The answer, as you’ve probably realized, is no. Except for very specific and well thought out reasons, using a credit card to pay your mortgage is generally a bad idea. You stand the risk of running up some very high interest charges.

Another issue is something called credit utilization ratio. This is the ratio between debt and credit limit. The higher the ratio, the lower your credit limit and the lower your credit score. This can have a significant impact on your creditworthiness and ability to purchase a car or get a loan. Carrying a large credit card balance from a mortgage payment can hurt your credit score.

My Credit Card Mortgage Debt is Killing Me

If you have gotten yourself in financial difficulties using your credit card to pay your mortgage and you are drowning in debt, Pacific Debt, Inc may be able to help you. We are a professional debt settlement company that works with people with significant amounts (over $10,000) in credit card debt to help settle their debt.

Pacific Debt Inc

Pacific Debt, Inc is one of the leading debt settlement companies in the United States with a national debt relief program. We can help you settle your debt, often for far less than you owe.

To be eligible for the Pacific Debt settlement program, you must have more than $10,000 in unsecured debt, and it takes roughly 2 to 4 years to complete our debt relief program.

Pacific Debt, Inc is accredited with the American Fair Credit Counsel and is an A+ member of the Better Business Bureau. We rate very highly in Top Consumer Reviews, Top Ten Reviews, Consumers Advocate, Consumer Affairs, Trust Pilot, and US News and World Report.

For more information, contact one of our debt specialists today. The initial consultation is completely free, and a debt expert will explain to you all your options so you can clearly understand them.

How to Get Out of Debt Yourself

How to Get Out of Debt Yourself

It is really easy to get into debt. Unfortunately, getting out of debt is no easy feat. But don’t despair. Getting out of debt yourself is totally possible. It won’t be as easy as getting into debt, but it can be done. Let’s look at ways to understand your debt and get control of it.

Talk to our Debt Experts for FREE so they can explain all your options.

Organize Your Debts

Your very first task is to understand your debt, how much you owe, the interest rate – all the important details.

Gather all bills, statements, reports or other information

1.       Set up a spreadsheet or notebook page with the following information

a.       Creditor’s name

b.       Balance

c.       Minimum monthly payment

d.       Interest rate

2.       Get all three credit reports (they are free once a year)

a.       Experian

b.       Transunion

c.       Equifax

3.       Your credit score

4.       Your take home pay

5.       Your expenses

Verify that everything is correct. Look over your credit reports for any incorrect information. If something is wrong, you can contact the credit reporting company to have it corrected.

Contact your lenders to see if they will lower your interest rates. That simple action can help you pay off debts faster.

You may be able to transfer credit card debt to lower rate cards. Just READ the small print to see how long the lowered interest rate will last.

Read this How to stop drowning in debt DIY Guide

Examine Your Expenses

In order to get out of debt, you will have to cut your expenses. Look through all your expenses. What can you do without for a time? Got a gym membership you never use or only use once a month? Do you really need Netflix and HBO and Hulu? Do you buy too many clothes, shoes, or knick-knacks? See what you can cut out or cut down on. Remember this is not forever. Eliminate those extra expenses.

Create a Budget

Budget isn’t always a dirty word! Basically, you need to write down every single expense you have. Be honest. Include those daily cappuccinos. If you like computers, you can find internet-based money management sites, like Mint.com to help.

Now figure out your income. By subtracting expenses from income, you’ll know how much you have leftover to reduce your debt. If you have more expenses than income, you’ll need to either increase your income or decrease your expenses.

By creating a workable budget, you have a much better chance of getting out of debt faster than you will be having no budget. Post your budget somewhere you will see it regularly.

Create a Debt Pay-Off Plan

Now that you have a sum of money to work with, make a debt pay off plan. You need to decide which bills to pay off first. Some experts recommend paying off the highest interest rate debt, others recommend paying the smallest debt first.

Here is a sample action plan

1.       Ask for lowered interest rates

2.       Eliminate expenses

3.       Put your credit cards somewhere inconvenient – so you can’t use them!

4.       Look into balance transfer credit cards

5.       Look into a consolidation loan

6.       Look into refinancing loans

7.       Pay off small debts quickly

Once you’ve lowered rates or refinanced or done a balance transfer, if appropriate, make a plan. Clearly state what you will pay, what you will pay off first, and how long it will take for each debt. Post this plan next to your budget. As you achieve each milestone, mark it off. You’ll feel accomplished and that makes everything a bit easier.  

As you pay off each bill, roll that amount into the next debt.

Wondering if Bankruptcy is the right choice, Read this article to find out if you get out of all debts if you declare bankruptcy.

Create an Improved Income Plan

Take a look at your income. Is there anything you can do to improve it? A new job might be necessary. Keep your eyes out for opportunities to change jobs for a better opportunity.

Adding a second job can add extra income. Currently, gig-type income like Uber, Lyft, or personal shopping is out there. Before you take on a gig, balance your effort and wear and tear versus your proposed income. A lot of gigs aren’t really worth the time.

Sell items you no longer need. If you can, sell extra stuff. We all have a lot of it, getting rid of it can make you money. Each time you get money, immediately put towards your targeted debt.

How to Get Out of Credit Card Debt

The best way to get out of credit card debt is to stop using it and pay off more than your minimum payment each month. If you are using your credit card to make up differences between income and expenses, you need to increase income and decrease expenses.

Student Loans

StudentLoans.gov is a federal website that can help with student loan consolidation and income-based repayment. These government loans can help you get out of debt.

Progress Plans

As you make progress or get a new (higher paying) job, revise your budget and debt pay-off plan. Don’t buy anything not absolutely necessary until your debt is zero. Then make up a reasonable budget and stick to it. The best way to get out of debt is not to get into it in the first place. For the rest of us, the best way is to make a budget and payment plan and stick to it!

Pacific Debt Inc

If you have tried all this and you are still drowning in debt, Pacific Debt Inc may be able to help. Pacific Debt, Inc is one of the leading debt settlement companies in the US. We can help you settle your debt, often for far less than you owe.

Read this article to find out what the tax consequences of debt settlement are.

To be eligible for the Pacific Debt settlement program, you must have more than $10,000 in unsecured debt, and it takes roughly 2 to 4 years to complete. Pacific Debt will custom tailor a plan to fit your current situation.

Pacific Debt, Inc is accredited with the American Fair Credit Counsel and is an A+ member of the Better Business Bureau. We rate very highly in Top Consumer Reviews, Top Ten Reviews, Consumers Advocate, Consumer Affairs, Trust Pilot, and US News and World Report.

For more information, contact one of our debt specialists today. The initial consultation is free and our debt specialists will give you all your options.

Debt Settlement Agreement Sample

Letter for Debt Settlement Agreement

What is a Debt Settlement Agreement?

Debt settlement is working with creditors to decrease the amount of debt that you owe. The debt settlement agreement is a written, legally binding agreement to decrease your debt through debt settlement, what happens if you default, and what happens after you pay back the settled amount.

Sample Debt Settlement Agreement Template for Download

Letter for Debt Settlement Agreement Template

Since you are looking at Pacific Debt’s website, you may be considering debt settlement as a hardship option. Many people want to know if they need to work with Pacific Debt, Inc. in order to settle their debt. The answer is no, but there are some very good reasons for you to work with us that will save you a ton of time, and most likely, a ton of money! Let’s look at how to go about debt settlement yourself.

How to Negotiate Your Own Debt Settlement

Before you get started, you need to have a strategic plan in place.

  1. Are You Current or Behind on Payments? How old is your debt? Debt settlement works best if you are NOT current on your payments. If you are making payments on time, creditors may assume that you are capable of paying back your debt. A creditor may be more willing to negotiate a settlement if you are behind on making payments. Read our article on How to Deal With Debt Collectors When You Can’t Pay
  2. Collection Information. You may have more than one delinquent debt. Get a notebook and set up separate sections for each debt. Include the company, the amount, the interest rate, the debt’s age. Every time you have contact about that debt, write down the details, including the name of the person who called, date and time. Decide which debts need to be paid first. It might be the least amount, the highest interest rate or other factors.
  3. Make a Repayment Timeline. Your plan should allow you to repay your debt within 24 to 48 months. Pacific Debt Inc estimates that it will take someone using our service to take 24 to 48 months, depending on your unique circumstances.
  4. Consider Selling Assets. Identify anything you can sell to raise some money. If you do, put it in a separate savings account so you don’t spend it. Pacific Debt Inc. helps set up an escrow account for you if you use our service. The goal is to have a lump sum built-up over time to settle your debt.
  5. Contact the Creditor or Collection Agency. Using your notebook, contact the creditors. Explain why you can’t pay the bill. DO NOT share bank account information or other personal financial information. Do not make promises. And importantly, don’t lose your temper! They want you to be emotional. If the company is interested in settling, they may offer a higher settlement amount. If you want to continue negotiating with them, suggest a different, lower amount. Pacific Debt Inc. knows which creditors or collection agencies are willing to negotiate and which ones don’t. It is a benefit of using our service! We have long-standing relationships established with most creditors.
  6. Consider Your Tax Consequences. Debt settlement can have some tax consequences. Since we’ve already discussed these in detail in a previous article, here is a summary. Basically, the IRS may treat the charge-ff amount (the debt settlement) as income for you. You may need to include a form 1099-C with your taxes. If you don’t, you may end up giving more money to the IRS than you need to.
  7. Get It in Writing. Click this link to find a sample debt settlement agreement. Do not make a payment until you have a debt settlement agreement signed by the company and in your possession.

Filling out the Debt Settlement Agreement Template

Here are some tips for filling out the letter of agreement for payment of debt.

  • The effective date is the date you make this agreement.
  • The creditor is the person you owe money to or the collection agency.
  • The debtor is you.
  • The outstanding debt is what you actually owe.
  • The sum is what you agree on.
  • The creditor will expect you to make payment by the specified date. If you don’t have the money to pay it, make sure that you factor that in.
  • The valid date is the date you agreed to pay the debt back.
  • Make two copies. Sign both and send to the creditor. They should sign and then return it.
  • Keep your agreement to pay letter in a safe place!

**We are not legal experts and have prepared this payment agreement template to only be used as a sample. It’s only intended to be a sample and it’s not meant for actual use. You should contact a legal expert in your area to discuss your options if you are intending to do a debt settlement yourself.

Should You Try Debt Settlement Yourself?

The answer to if you should DIY debt settlement or hire debt professionals like us depends on you. Only you can answer that question. If you choose to do it yourself you will have to do all the negotiating, paying, saving, and dealing with debt collectors. It can be extremely frustrating, upsetting, and requires a massive amount of time on the phone, as well as organization and patience.

Find out why Pacific Debt has been ranked as one of the “The Best Debt Settlement Companies of 2019”.

Debt settlement is not an easy process to go through by any means. If you don’t want to try debt settlement yourself, you can contact Pacific Debt Inc. Our debt settlement experts will help you understand all your options and the initial consultation is 100% free. We’ll do all the work and keep you updated throughout the entire process.

If you’d like more information on debt settlement or have more than $10,000 in unsecured debt that you can’t pay,contact Pacific Debt, Inc. We may be able to help you get out of debt in 2 to 4 years with our debt relief program. We have settled over $250 million in debt for our customers since 2002.

Pacific Debt, Inc is accredited with the American Fair Credit Council and is an A+ member of the Better Business Bureau. We rate very highly in Top Consumer Reviews, Top Ten Reviews, Consumers Advocate, Consumer Affairs, Trust Pilot, and US News and World Report.

For more information, contact one of our debt specialists today. The initial consultation is free, and our debt experts will give you all your options.

FREE CONSULTATION

Can You Go to Jail for Not Paying Taxes?

Can You Go to Jail for Not Paying Taxes?

Disclaimer – We are not lawyers or tax professionals and we are not giving legal or tax advice. These are merely some options and information about taxes. Consult an attorney or tax professional in your area to determine all your options.

Jail for Not Paying Consumer Debt

Consumer debt like credit card balances, loans or hospital bills are technically not jail-able offenses. If a debt collector is threatening you with jail, you are being harassed. This is illegal under the Fair Debt Collection Practice Act (FDCPA). However, many states have made it easier for creditors to use the court system to put debtors in jail.

Learn the common myths and scare tactics used by debt collectors.

Technically, imprisoning someone for the inability to pay consumer debts is illegal. However, you can be held in contempt of court for failing to comply with in-court examinations or payment plans. Local judges in 44 states can issue warrants for debtors who don’t show up for post-judgement appearances or do not provide information on personal finances.

Another wrinkle is that in over 200 counties, sheriff and police departments allow private debt collectors to use the prosecutor’s official letterhead to threaten debtors.

How to Avoid Jail for Credit Card Debt

Creditors and debt collectors have a clear series of steps to take before jail becomes a possibility. First, you can get sued in civil court for money. DO NOT ignore the summons letter from the court if you receive one.

Second, the debt collector must prove it is your debt and the judge must rule in their favor. If this happens, the court may garnish wages or intercept a tax refund. The only time that jail time can become a possibility is if you do not obey the court!

If a debt collector has filed a lawsuit against you, DO NOT ignore the paperwork. If you cannot pay, just showing up may convince the creditor to drop their civil lawsuit against you. The summons from the court will have clear instructions on what to do.

If you are receiving threatening letters from debt collectors, you should read our article How to deal with debt collectors if you can’t pay

This link takes you to a page with more information on summons and demand letters and your responses.

Protect yourself by

  • Responding to the notices and orders from the court
  • Go to any court-ordered appearances like post-judgment hearings and debtor’s examinations.
  • Find a consumer attorney or the state attorney general’s consumer division for information.
  • As a last resort, you may be able to file for bankruptcy.

You cannot go to jail for not being able to pay, but you can go to jail for ignoring the court.

Jail for Not Paying Civil Fines or Criminal Justice Debt

If you don’t have the money to pay court costs or fines, the outcome depends on your state of residence. The Supreme Court declared that jailing someone for inability to pay court costs and fines is unconstitutional. Unfortunately, some state and local courts assess fees, fines and costs as part of the sentence, probation or parole.  If you can not pay these assessments, you may be sent to jail.

According to the ACLU, states where you can go to jail for debt include Arkansas, California, Colorado, Georgia, Louisiana, Maine, Michigan, Mississippi, Nebraska, New Hampshire, Ohio, South Carolina, Tennessee, Texas and Washington.

Can I Go to The Police If Someone Owes Me Money?

No. Law enforcement is concerned with criminal law, not civil law. If someone owes you money and won’t pay, your only resource is to sue them in court. Most people are familiar with small claims courts after watching the many Judge Judy style shows on TV. States set an upper monetary limit, from $2,000 to $10,000, for cases fined in small claims courts. You don’t need a lawyer and court costs are generally far less expensive. Claims that exceed the maximum limit are heard in superior court.

Your steps to file a small claim suit include:

  • Meeting the jurisdictional requirements for the court
  • Does the amount you want to recover fall within the state maximums
  • You must then file in the proper venue (county where it occurred)
  • Fill out all paperwork
  • Have the papers served (may entail a small fee)
  • File a proof of service with the court so the court knows the other party has received all paperwork
  • Document your claim
  • Go to the court hearing

A Disclaimer

If you are dealing with the IRS, you really need a professional to represent you. Hiring a qualified tax attorney can make a huge difference. We are not experts in tax law and are not providing advice.

If you are dealing with criminal justice debt, your best recourse may be to contact the ACLU.

If you are dealing with civil court and debt collectors, you may want to contact an attorney or find a low-income legal adviser. If you live near a law school, students are often available to help with advice.

Pacific Debt, Inc

Before you declare bankruptcy, you may want to contact the debt settlement professionals at Pacific Debt, Inc. If you’d like more information on debt settlement or have more than $10,000 in credit card debt that you can’t pay, contact Pacific Debt, Inc. We may be able to help you become debt free in 2 to 4 years. We have settled over $250 million in debt for our customers since 2002.

Pacific Debt, Inc is accredited with the American Fair Credit Council and is an A+ member of the Better Business Bureau. We rate very highly in Top Consumer Reviews, Top Ten Reviews, Consumers Advocate, Consumer Affairs, Trust Pilot, and US News and World Report.

For more information, contact one of our debt specialists today. The initial consultation is free, and our debt experts will give you all your options.

FREE CONSULTATION

What Are The Tax Consequences of Debt Settlement?

What Are The Tax Consequences of Debt Settlement?

Disclaimer – We are not lawyers or tax professionals and we are not giving legal or tax advice. These are merely some options and information about taxes. Consult an attorney or tax professional in your area to determine all your options.

What Are the Tax Consequences of Debt Settlement?

Debt settlement can be a decision that saves you a ton of money. However, debt settlement can also have some fallout potential with the IRS. Did you know that debt settlement for less than the full amount can possibly result in tax consequences? If you are thinking about settling a debt for less than the total, you should understand the possible tax consequences.

Call and speak to our debt specialists for FREE!

Tax Consequences of Debt Settlement

When a creditor writes off all or part of a debt, that creditor can turnaround and then report it to the IRS as lost income and the creditor’s tax burden is reduced by doing this. However, that means you could be responsible for that lost amount. Your forgiven debt or partially forgiven debt can be considered income and you could pay income tax on it. It can even apply to foreclosures.

If you can prove to the IRS that you are legally insolvent, you usually won’t have any tax consequences. If you are insolvent, which means your debts are more than your assets, you may qualify for an exemption.

Also, if you decide to move forward with a debt settlement company like Pacific Debt, you can write off any fees you have paid.

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The 1099-C Cancellation of Debt Form

If you are forgiven $600 or more of the original balance, not including interest and fees, the creditor may send you a 1099-C form at the end of the tax year. The amount on this form is now considered income and must be reported to the IRS. The creditor will report it to the IRS in order to lower their tax burden.

If you do not get a 1099-C, don’t assume the IRS doesn’t know about the write-off. Your creditor may of submitted one to the IRS at some point. If you don’t declare the deficiency balance, you may receive a tax bill plus interest and penalties. And here’s a fun fact about the IRS, they may forgive your tax burden, but they usually don’t forgive your penalties and interest!

How does a 1099 C affect my tax refund?
A 1099-C may affect your tax refund depending on your income and other taxable considerations. Talk to a tax professional if you are filing a 1099-C and see if you qualify for an exception.

What to do if you receive a 1099 C Form?

If you have received a 1099-C from one of your creditors, you need to report the settled debt amount to the IRS as income. You could always ask the creditor yourself if they intend to file a 1099-C with the IRS.

How Much Tax Do You Pay on Forgiven Debt?

The amount of tax you pay on charged off debt depends on your unique situation and your marginal rate of tax. You are considered insolvent if your liabilities exceed your income when you settled the debt. Ask a qualified tax specialist if you can take an insolvency exemption and get your tax debt forgiven.

Debt Settlement or Write-off Tax Consequences

If you are in a debt settlement program, remember that you may have to pay taxes on forgiven debt. Find out if the creditor will be submitting a 1099-C, and if so, the exact amount they will declare on it. Next, keep your eye out for the form after the first of the year. And finally, make sure the 1099-C is correct before you submit it to your tax specialist. If it isn’t, contact the creditor to have it corrected.

If you are curious how much you may owe, check out a debt forgiveness calculator to get an idea. Remember that this is based on simple information and may not be absolutely correct.

Debt Settlement and Your Credit ScoreYou will most likely see a negative effect on your credit score from debt settlement but most likely at this point you are already having difficulty paying your bills and may already be experiencing a drop in your FICO score, otherwise known as your credit score.

The good news is once you complete our debt settlement program you can then work to improve your credit score and repair your credit. Our debt settlement program can last years in order to help you reduce your debt so if maintaining a high credit score is your priority, debt settlement might not be for your current financial situation.

You can find out your credit score on any one of the credit bureaus. Once you can access your latest credit report, you can see all the items on your credit. You should check your credit report often to see if anything has changed. If your credit score drops from good credit to bad credit, you’ll going to want to know about it immediately.

You should also keep a watchful eye out for identity theft. Identity theft is rising rapidly and can ruin your credit. Always look out for negative information and make sure its correct. If you see incorrect information on your credit report you need to dispute it right away.

Pacific Debt, Inc

If you’d like more information on debt settlement or have more than $10,000 in credit card debt that you can’t pay, contact Pacific Debt, Inc. We may be able to help you become debt free in 2 to 4 years. We have settled over $250 million in debt for our customers since 2002.

Pacific Debt, Inc is accredited with the American Fair Credit Council and is an A+ member of the Better Business Bureau. We rate very highly in Top Consumer Reviews, Top Ten Reviews, Consumers Advocate, Consumer Affairs, Trust Pilot, and US News and World Report.

Debt Settlement Tax consequences

Pacific Debt is currently providing debt relief coverage in the following states:
Alabama, Alaska, Arizona, Arkansas, California, District of Columbia, Florida, Hawaii, Iowa, Idaho, Indiana, Kentucky, Louisiana, Massachusetts, Maryland, Michigan, Minnesota, Missouri, Mississippi, Montana, North Carolina, Nebraska, New Mexico, New York, Oklahoma, Pennsylvania, South Dakota, Texas, Utah, Virginia, Wisconsin

For more information, contact one of our debt specialists today. The initial consultation is free, and our debt experts will give you all your options.

FREE CONSULTATION

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"My dealings with the Pacific Debt representatives was a most pleasant experience. I started the program in October of 2012, my goal being to pay off all my credit card debt as quickly as possible."

Cathy

"I just wanted to thank you for work you did for us on settling our credit cad debts. You were honest and explained everything you were doing in detail. I had a lot of confidence in you. I felt that I did the right thing in contacting your Pacific Debt and you to do by right by us."

Shirley

"I just wanted to send a quick thank you for all you have done! It wasn't an easy couple of years financially, but I made it through! Thanks to you, Pacific Debt, I can now make a fresh start."

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