Justdebtfree

According to leading market analysts, rate tarts are costing the UK lending industry over one billion pounds a year. This is pretty much the same as saying that rate tarts are saving themselves one billion pounds a year. So what, or who are they, and why have they gotten the lending industrys attention.

0% Balance Transfer Credit Cards

Well, most people are reasonably familiar with the balance transfer and other offers that lenders are putting out to try and entice customers to come over to them from other lenders. Offers such as zero per cent interest rates on balance transfers are now viewed as a matter of course and there are even credit cards coming out now that give zero per cent, not only on balance transfers, but on new purchases also. This is truly astounding. Never before have such offers been available on the market and customers are right to snap them up when it suits them. They are the product of increased competition in the industry and everyones right to take advantage of. These rates are typically sweeteners to entice you over to the new company, where you will enjoy them for a limited period of say six or nine months, before reverting to more typical levels depending on the nature of the credit.

Surfing the Net for Credit

What rate tarts do however is they follow and take up on these offers. They then enjoy the zero per cent interest rates for the period allowable, and instead of sticking with the company at the end of the period; they simply jump ship to another company offering similar incentives. In this way they manage to keep their debts interest free for as long as possible.

A Word of Caution

While these customers are well within their rights to do so, they should exercise care while doing it or they will regret their action. First of all, if lenders can find out that you are one of these customers, they may decide not to make their incentives available to you. This is not very common at the moment but whos to say what the future holds if the problem continues to grow. Another risk is that if you jump from credit card to credit card without closing any of the accounts, you will actually have access to a huge amount of credit, and lenders who see this may worry that you are planning on spending all this credit with no means of paying it back. Therefore it is a good idea to close each account after you leave it, rather than simply throw away the card.

Are you in debt? Have you run out of options? There are solutions out there, some radical, but one or more may be what you need to help you get out of debt.

1.Bankruptcy. Yes, bankruptcy is an option for some, especially if there is no way that you possibly could pay back what you owe. The American constitution gives citizens the right to be emancipated from debt and it is a choice that some must select in order to be set free. However, recent changes in U.S. bankruptcy laws have made filing for bankruptcy much more difficult to do; search online for the latest information about the new bankruptcy laws.

2.Consolidate Debt. Before seeking relief through bankruptcy, consider combining all of your debt in order to make one monthly payment. Loan consolidators can help you come up with a plan to pay off all of your debt while helping you to maintain your credit standing. Bankruptcy, unfortunately, ruins your credit while a consolidation loan may help you reclaim it. Consider finding a credit card that allows you to consolidate your debt through balance transfers some have low introductory rates too.

3.Redeem Your Life Insurance Policy. Your life insurance policy may have some cash value to it. Think about taking cash from the policy and using it to pay off or reduce your obligation.

4.Government Borrowing. Help may be available to you through a government entity [i.e., city, county, state, or federal] and at a rate lower than what conventional creditors might assess. Examine loan programs, grants, family gifts, etc. to uncover what may be available to you.

5.Borrow From Your 401(k). If you have a 401(k) or 403(b) plan, you might be able to create a low interest rate loan and use the monies to pay off or reduce your debt. You are borrowing from your retirement account so you will need to pay everything back [with interest] or face tax penalties.

While these solutions are radical for some people, one or more may be what you need to get back on your financial footing. Compare options carefully and choose the solution that is right for you.

Are you feeling hopeless about the future? Are you feeling hopeless and helpless about your current situation? Are you feeling depressed? Do you find no way to come out of this hopelessness? It is time to consult a Doctor about your depression.

Can your depression be related to your debts? Are you also having debts to repay? Debts can cause constant worry and make us feel depressed. Especially when we have no ready plan to repay our debt, the depression can be severe.

What are you planning about your debt? Have you planned any repayment schedule? Have you planned any method to increase your income? If not, please begin doing that. Let us look at this problem in totality. You have a certain income. You have a certain debt. You have certain expenses. You have to save money from your income and repay small amount every month so that one-day you are out of it. The first step is to write down all these figures. Then think of every method that can increase your income. Similarly try to reduce your expenses. This will obviously give you more money to repay. Now talk to your creditors. Ask them for rescheduling the debt so that is comfortable for you to repay. Approach them positively and explain the position. Be optimistic. They will agree.

Feeling hopeless never solves the problem. Finding solution will do that. Fight your debt related depression with proper strategy and planning.

Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.

This provision applies to debt forgiven in 2007, 2008 or 2009. Up to 2 million of forgiven debt is eligible for this exclusion (1 million if married filing separately). The exclusion doesnt apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the homes value or the taxpayers financial condition.

The amount excluded reduces the taxpayers cost basis in the home. More information on claiming this exclusion will be available soon.

The questions and answers, below, are based on the law prior to the passage of the Mortgage Forgiveness Debt Relief Act of 2007.

1.What is Cancellation of Debt?

If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.

Heres a very simplified example. You borrow 10,000 and default on the loan after paying back 2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of 8,000, which generally is taxable income to you.

2.Is Cancellation of Debt income always taxable?

Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:

Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets. Insolvency can be fairly complex to determine and the assistance of a tax professional is recommended if you believe you qualify for this exception.
Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income. The rules applicable to farmers are complex and the assistance of a tax professional is recommended if you believe you qualify for this exception.

Non-recourse loans: A non-recourse loan is a loan for which the lenders only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences, as discussed in Question 3 below.

3.I lost my home through foreclosure. Are there tax consequences?

There are two possible consequences you must consider:

Taxable cancellation of debt income.(Note: As stated above, cancellation of debt income is not taxable in the case of non-recourse loans.)

A reportable gain from the disposition of the home (because foreclosures are treated like sales for tax purposes).(Note: Often some or all of the gain from the sale of a personal residence qualifies for exclusion from income.)

4.I lost money on the foreclosure of my home. Can I claim a loss on my tax return?

No. Losses from the sale or foreclosure of personal property are not deductible.

5.Can you provide examples?

A borrower bought a home in August 2005 and lived in it until it was taken through foreclosure in September 2007. The original purchase price was 170,000, the home is worth 200,000 at foreclosure, and the mortgage debt canceled at foreclosure is 220,000. At the time of the foreclosure, the borrower is insolvent, with liabilities (mortgage, credit cards, car loans and other debts) totaling 250,000 and assets totaling 230,000.

6.I dont agree with the information on the Form 1099-C. What should I do?

Contact the lender. The lender should issue a corrected form if the information is determined to be incorrect. Retain all records related to the purchase of your home and all related debt.

7.I received a notice from the IRS on this. What should I do?

The IRS urges borrowers with questions to call the phone number shown on the notice. The IRS also urges borrowers who wind up owing additional tax and are unable to pay it in full to use the installment agreement form, normally included with the notice, to request a payment agreement with the agency.

8.Where else can I go to get tax help?

If you are having difficulty resolving a tax problem (such as one involving an IRS bill, letter or notice) through normal IRS channels, the Taxpayer Advocate Service may be able to help.

In some cases, you may qualify for free or low-cost assistance from a Low Income Taxpayer Clinic (LITC). LITCs are independent organizations that represent low income taxpayers in tax disputes with the IRS. Find information on an LITCs in your area.