There are several methods available to the consumer to consider when trying to get out of debt.  These methods are:

·         Try and manage their current debt themselves – in other words tighten their belt and spending habits.

·         Debt consolidation loan – this would combine all outstanding unsecured debt into a single payment loan. The problem is can the consumer qualify for a new loan with no job or financial hardship issue.

·         Refinance or Home Equity loan – This might work, if the consumer has enough equity in their home, however the repayment may be an issue.

·         Credit counseling service – This program acts like a debt consolidation loan. The consumer pays a third party company who in turns pays a small or set percent each month to the lenders until all the balances are pay off. In addition, there is credit counseling for the debtor and this will also have an affect on your credit score.

·         Bankruptcy – This is the most serious and the final step that a consumer should consider.  The consumer needs to discuss with an attorney all facets of bankruptcy since it will cover all debts, both secured and unsecured.

·         Debt settlement – This is a program by which a third party negotiates with the lender in order to reduce the outstanding balances on unsecured credit cards.

Getting a letter from the IRS can be a scary proposition.  But you do not need to loose your cool.  Just take a deep breath and read it again.  Sometimes your brain can trick you.  You think that you are reading one thing and the letter may actually mean something else.  Most letters from the Internal Revenue Service are just over minor issues.

Recently I got a letter in the mail from the IRS stating that they wanted $21,000 in back taxes.  I thought I was going to loose my mind.  When I got to the heart of the matter I found out that my IRA rollover was not reported correctly.  I thought that is going to take forever to get straight with the tax man.  All it took was a phone call to explain the problem.  The woman I spoke with at the IRS just said not to worry about it and she would send out a letter to fix it.  That was it.  You do not need to fear the IRS they want to get it right and they do not really want to give you a hard time either.

It just goes to show you that 99% of what you worry about never happens.

What is an Offer in Compromise

You may have seen the commercials on the tv and where curious as to what exactly is an Offer in Compromise? If you are unable to pay your income taxes in full and an installment plan wont work, a person may be able to do an offer in compromise. An offer in compromise is looked at as a last resort option after a taxpayer has exhausted all other options. The reality is that the IRS only resolves less than one percent of all tax bills owed through this type of method. The TV commercials make it seem like you can just pick it right off the shelf and get it done. The reality is that your chances of being able to work this option out with the Internal Revenue Service is remote. Continue Reading »