Nonprofit Debt Settlement and Debt Solution Counseling Agencies- Think Twice Before You Leap

Consumers that deal with credit card debt sometimes find it necessary to a get a little outside help. Consumer credit counseling agencies are a great, free resource for consumers needing a little extra help with budgeting, planning, or even setting up a debt repayment plan, otherwise known as a Debt Management Plan (DMP).

But you may be wondering if you really need help. Here are some warning signs to help you decide if it’s time to start investigating a non-profit consumer credit counseling agency.

• Your own efforts at working out a reasonable repayment plan have failed.
• Based on your current budget, it will take longer than five years to repay your credit card debt.
• Your total monthly debt payments, not including mortgage and car, equal 1/4 – 1/2 of your take-home pay.
• Your are unable to pay even the minimum amounts due on each credit card every month.
• You are consistently late with one or more regular bills other than credit cards, including utility and auto bills.
• Creditors and collection agencies frequently call you.
• You and your spouse fight about debt and financial issues.
• You don’t know if you can really afford to purchase something.

Consumer advocates strongly suggest that you check your credit score on a regular basis, especially before applying for new credit.

1. Know What to Look for in a Credit Counseling Agency

With the assortment of agencies trying to get your business it can be difficult to know which one is best. First things first, look for an agency that is non-profit and accredited with either the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.

It’s also a good idea to contact the local Better Business Bureau to see if any complaints have been filed against the company and how the issue was resolved. Similarly, checking our active credit forum for posts regarding the company is a good idea.

Finally, make sure they are licensed to offer services in your state and that they don’t require detailed information about your situation before sending free informational material about the services they offer.

2. Know What They Offer

A reputable credit counseling agency offers many wonderful services including assistance from a certified counselor who will help you create a personalized budget and possibly a debt management plan (DMP); working with creditors to lower or eliminate interest, finance charges, late payment penalties, and other types of fees; distributing payments to each of your creditors enrolled in your DMP; and, most importantly, giving you lots of free educational materials.

3. Know How They Will Help You

The first step a credible counselor will take is thoroughly analyzing your financial situation; plan for an hour long initial visit and several follow-up sessions. Then, based on what they see, they can set up a plan to help you both in the short-term and the long-term.

Sometimes long-term help involves a debt settlement program , but not necessarily. If the agency won’t continue providing budget counseling unless you sign up for a DMP, look elsewhere.

Another warning sign to look elsewhere is the unrealistic promise of erasing your credit history. No one can erase your credit history. Under the Fair Credit Reporting Act, accurate information about your accounts stays on your report for up to seven years.

Source:cardratings.com

Irs Debt Help: 5 Options To Getting Rid Of Tax Debt

Do you owe the IRS? Are you struggling with IRS debts and cannot figure out what to do? Don’t despair, you are not alone. Many Americans owe back taxes, or cannot afford to pay their IRS debts. If you want to get IRS debt help , it’s important to understand the different IRS tax debt strategies.

There are five strategies for getting out of IRS tax debt.

1.Offer in Compromise: a program where you can settle your tax debts for less than what you owe. Requires making a lump sum or short term payment plan to pay off the IRS at a reduced dollar amount.

2.Installment agreement: a monthly payment plan for paying off the IRS.

3.Partial payment installment agreement: a somewhat new debt management program where you have a long term payment plan to pay off the IRS at a reduced dollar amount.

4.Not currently collectible: a program where the IRS voluntarily agrees not to collect on the tax debt for a year or so.

5.Filing bankruptcy: discharge your tax debts under the strict rules of a Chapter 7 or 13 bankruptcy petition.

Offer in Compromise

Many people who find themselves in debt to the IRS might focus on the first option above – the Offer in Compromise (“OIC”). For those who qualify it can be the optimal solution, however, it is important to note that not everyone qualifies for the Offer in Compromise solution. Only about 15% of applicants succeed in reducing their debts through the OIC program. For this reason and because of the complexity of filing an Offer in Compromise many people enlist the services of a Tax Professional who has a track record of success negotiating with the IRS. This Tax Professional will not only be able to determine if you are eligible to reduce your IRS debts via an OIC but they will also assist you in navigating the complicated IRS bureaucracy to achieve the desired outcome.

An Offer in Compromise is a lengthy and time-consuming process. It takes most individuals anywhere from 12 months to 24 months to achieve a successful resolution on your offer application. Through an Offer in Compromise, taxpayers agree to pay the IRS only the reasonable collection potential instead of the full amount of taxes owed. For some people the "reasonable collection potential" will be less than the full amount of taxes owed – sometimes as little as 10%.

Installment Agreement

Many taxpayers cannot qualify for an Offer in Compromise, Statute of Limitations expiration, or bankruptcy relief but still seek resolution for their IRS liability. In these cases, it may be possible to negotiate long term IRS payment arrangements. The IRS allows “structuring” five primary types of payment plans, or Installment Agreements: Guaranteed Installment Agreements, Streamlined Installment Agreements, In-Business Trust Fund Agreements, Long-Term Installment Agreements, and Installment Agreements on Specified Balance Due Accounts.

Currently Not Collectible

If a taxpayer does not qualify for an offer in compromise and cannot afford to pay an Installment Agreement, Currently not Collectible (CNC) status may be an option. If a client is placed in CNC status, the statute of limitations continues to run and the IRS will not pursue collection actions. However, if a taxpayer’s financial status improves, the IRS can remove the file from CNC status and return to active collection status.

Reasons for attempting CNC status:

1. Taxpayer has income below allowable expenses and there is no indication that the financial situation will improve in the future;

2. Due to high equity, the taxpayer does not qualify for an OIC and has more allowable expenses than income so an Installment Agreement is not an option; and,

3. Taxpayer has more allowable expenses than income and the statute of limitations is getting close to expiring.

Statute of Limitation for IRS Tax Debt

The IRS has 10 years to collect outstanding tax liabilities. This is measured from the day a tax liability has been finalized. A tax liability can be finalized in a number of ways. It could be a balance due on a tax return, an assessment from an audit, or a proposed assessment that has become final. From that day, the IRS has ten years to collect the full amount, plus any penalties and interest. If the IRS doesn't collect the full amount in the 10-year period, then the remaining balance on the account disappears forever. The statute of limitations on collecting the tax has expired.

Selecting a Tax Professional to handle your IRS Tax Debt

Because of the complexity of the Offer in Compromise and other IRS tax debt processes, many taxpayers hire a tax professional to prepare their IRS documentation and to negotiate directly with the IRS. Tax professionals charge anywhere from $1,500 to $6,000 or more for accurate and thorough IRS representation. Because most of the IRS tax debt solutions involve negotiating with the IRS, your tax professional should be admitted to practice before the IRS. You should be looking for a Tax Attorney, an Enrolled Agent (EA), or a Certified Public Accountant (CPA) to handle your Offer in Compromise. The tax professional must know about the laws governing IRS collection of tax debts, how the IRS evaluates offers, and what all the options are for resolving tax debt problems. “Taxpayers should be looking for a tax professional with years of experience in IRS collection matters, especially experience in dealing with revenue officers, the Automated Collection Systems division, and the complex IRS process” according to Jim Brown, the managing tax attorney with Freedom Tax Relief.

Please be aware that even the most successful tax professionals have lost Offer in Compromise cases, so not every consumer looking for tax help is guaranteed the most savings. It is important to know that your Offer in Compromise will be decided based on your unique financial situation. If you do need IRS debt help, having a tax professional represent you before the IRS will help ensure that all letters and phone calls from the IRS are handled quickly and professionally. But in the end, it is up to the IRS to make a decision about your case.

It is important to know that like death and taxes, your IRS tax debt issue will not simply vanish, so you should seek help before the IRS escalates collection efforts and/or you accrue additional penalties and interest.

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