What is Debt Relief?
Debt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth...
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Debt Relief
Having trouble paying your bills?
Getting notices from creditors?
Are your accounts being turned over to debt collectors?
Are you worried about losing your home or your car?
You're not alone. Many people face a financial crisis some time in their lives. Whether the crisis is caused by personal or family illness, the loss of a job, or overspending, it can seem overwhelming. But often, it can be overcome. Your financial situation doesn't have to go from bad to worse.
If you or someone you know is in financial hot water, consider these options:
- Budgeting
- Credit counseling
- Debt consolidation
- Bankruptcy
Debt settlement is yet another option. How do you know which will work best for you? It depends on your level of debt, your level of discipline, and your prospects for the future.
The Mortgage Forgiveness Debt Relief Act
If you owe a someone and they cancel or forgive that debt, the canceled amount may be taxable. The Mortgage Debt Relief Act of 2007 generally allows a person to exclude income from the discharge of what they owe on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the payer’s financial condition.
More information, including detailed examples can be found in Publication 4681. Also see IRS news release IR-2008-17. |
Mortgage Forgiveness Debt Relief Law
The federal law covers qualified debt forgiven from 2007 through 2012,1 and it:
- Limits the amount of qualified principal residence indebtedness to $2,000,000 for a person who file as married filing jointly, single, head of household, or widow/widower, and to $1,000,000 for a person who file as married filing separately.
- Does not limit the debt relief amount: it only limits the indebtedness amount used to calculate the relief amount.
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