Preventing Bankruptcy with Loan Consolidation
Author: Lenard Ashley
You can prevent bankruptcy by consolidating your debt with the help of a loan or debt consolidation agency to reduce your monthly payments and quickly pay off your liability. But before signing final paperwork, you should develop a financial plan and research your options.
Goal Of Consolidation
The goal of consolidation is to lower your monthly payments so you can pay off your debt and avoid bankruptcy. However, consolidation only works if you make it part of a larger financial plan. You have to be committed to reducing your liability and saving for financial emergencies.
Once you have consolidated your loans, it is a good idea to build a financial cushion of six months worth of cash reserves. This ensures that you can pay cash for the inevitable financial emergency and not increase your credit load.
Your next goal should be to make extra payments. The sooner you can pay off your principal the less you will pay in interest payments.
Types Of Debt Consolidation Loans And Programs
The two types of debt consolidation loans are mortgage loans and personal loans. Mortgage loans are ideal since their interest is tax deductible. However, you need to be sure that you have enough equity to borrow against and that you can recoup the cost of up front fees.
The other option is to use a personal loan. Personal loans are based on your credit score and income. Personal loans typically have lower interest rates than credit cards, but are usually higher than mortgages rates.
Instead of a loan, you can also use a debt consolidation service. These companies will negotiate lower interest rates with your creditors. There are no fees involved since these companies are usually non profit. They also provide credit counseling, offering financial advice and guidance.
Debt Consolidation Providers
Depending on what type of loan or program you choose, debt consolidation providers are relatively easy to find. If you are planning to use your home equity, then you will want to search for a mortgage lender. Many lenders offer free quotes online for easy comparison.
Personal loan lenders also can be found online. As with any financing company, you need to research rates and terms to find the best deal. Requesting a quote from a lender does not lock you into a loan. Legitimate lenders will be more than willing to provide this information to help you make a wise financial choice.
You can also get connected with debt consolidation services online. Some directory sites will help you find an agency in your area or you can work with a national agency.
Article Source: http://www.articlesbase.com/finance-articles/preventing-bankruptcy-with-loan-consolidation-1738486.html
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Are the fees I paid my bankruptcy lawyer and trustee tax deductible?
I filed bankruptcy paying over 3k to my lawyer and fees to the Bankruptcy courts are any of these fees tax deductible?
Thanks,
For those of you who have the smart stupid remarks the bankrupcty i filed was a chapter 13 which means everyone was paid back. So I didnt get over on anyone or get forgived of any debt.
Tax Pro Opinion – Foreclosure/2nd Mortgage Issue?
I can’t find anything about this situation.
My house has a 1st and 2nd mortgage (Home Equity Loan). The Home Equity loan was used for repairs & updates on the house so I’ve been claiming it all along on my taxes (the interest payments).
The house is going into foreclosure. The main mortgage is FHA insured, but the 2nd mortgage is not. I make just a little too much to be eligible for Chapter 7 Bankruptcy, which is the only way to totally discharge debt.
I could do Chapter 13 (or maybe it is 11), but that is just restructuring and paying back what is owed. The 2nd Mortgage bank is willing to work with me on lower payments and longer payback time and they know the house is foreclosing – which would at least avoid lawyers fees for them & me.
I’m just wondering if anyone thinks there is any chance at all that those payments could remain tax deductible (the interest portion) after the house has foreclosed and I am no longer the owner of it. The loan WAS for my home and the funds WERE used in accordance to the rules which have made it eligible for tax deductibility.
What are your thoughts? Am I dreamin’?
Are attorney fees for bankruptcy tax deductible??r=1254504423?
are bankruptcy fees tax deductible?
Any 2009 Tax exemptions for a divorce and Ch 13 bankruptcy?
I’m working on a friends taxes, and though i’ve been doing my own for many years, this is the first time I have had to deal with a divorce & bankruptcy situation. So here is the question…..
My friend filed in early 2009 for divorce and bankruptcy. She was head of household (the POS didn’t want to work and lives with his Mommy now – still unemployed). Anyways, are any of her expenses for either the Ch 13 or divorce deductible? She pays $400/mo into the bankruptcy plan, lost her home, and for this year, will be claiming 2 or their 3 children as dependents.
So are the following deductible:
Lawyer fees
Ch13 payment plan
Anything else???
At first blush those legal expenses would appear to be personal legal expenses and therefore not deductible. However if you were able to make a case that your bankruptcy was an effort to produce taxable income it would be deductible. It would require very careful understanding of the nature of your bankruptcy proceeding to make such a case. If you are self employed and the bankruptcy is directly related to that activity you could have an argument.
As for you being concerned about cancellation of debt as income bankruptcy is an exception. You may have some adjustments to basis of any property that you retain on which debt was canceled.
If you would like to learn more about this check out IRS Publication 908 at the following link.
http://www.irs.gov/pub/irs-pdf/p908.pdf
Only the portion, if any, that is for preparation of tax returns. To be deductible, attorney’s fees must be either for the preparation of tax returns or for services related to the production of taxable income. Fees for a bankruptcy are not for either of those services so they are not deductible.
Neither the fees related to the bankruptcy filing or the divorce would be deductible. In addition, she may have to turn over any refund she gets to the bankruptcy trustee.
If any 1099 C(canceled debt) are reported and the taxpayer is insolvent or bankrupt as filed the canceled debt will not have to be included in income.
Legal fees are only deductible for tax advice, the preparation of tax returns, or for legal advice directly related to the generation of taxable income.
Dear nova: See IRS Pub 4681 with 24 pages of relevant info concerning the new tax law for “Foreclosures, Repossessions and Abandonment.”
This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more. Errol Quinn Enrolled Agent Master Tax Advisor