Debt Settlement -- Why the Critics Are Wrong

Author: Charles J. Phelan

Source: articleage.com



A lot more people are becoming interested in debt settlement as an alternative to bankruptcy. That's because a new bankruptcy law was enacted on October 17, 2005, which means a rude awakening for many consumers seeking a fresh start in bankruptcy court.



It used to be that 7 out of 10 people filing personal bankruptcy were granted Chapter 7 status, where the unsecured debts are totally wiped away. That has changed under the new rules. If your income is above the median for your state, or you can pay back at least $100 per month toward your debts, then you'll be turned down for Chapter 7. Instead, you'll be shifted into Chapter 13, where you pay back a portion of the debt over 3-5 years.



It gets worse. When the court calculates your allowable living expenses, it will use the approved IRS schedules, not your actual documented expenses. So even if you don't think you can pay $100 a month or more, the judge will probably disagree. Instead of a fresh start, many people will be faced with the grim reality of a harsh 5-year plan, on a court-mandated budget that forces them to adopt a much lower standard of living. That's where debt settlement starts to look pretty attractive.



Yes, I know debt settlement has its critics. I've criticized aspects of the industry myself. But what the critics don't seem to understand is that this approach is for people who would otherwise go bankrupt! Let's examine the three main complaints against debt settlement and see where the critics are missing the mark.



"Debt settlement has a negative impact on your credit score."



Wow. Big deal! Pretend it's two years from now. Would you rather have an A+ credit rating or be totally free of debt? Pick one please, because you can't have both. All debt reduction programs have a negative impact on credit scores. That's why only people who truly can't keep up with their bills should go into one of these programs. But it's pointless to worry about your credit while you're being crushed with debt. That's like worrying about how the yard looks after your house has burned down.



"You might have to pay taxes on the canceled portion of the debt."



I've always been amazed at how frequently this lame criticism is repeated in article after article. Yes, it's possible that you may need to pay taxes on forgiven debt balances, but the odds are against it. That's because the IRS allows insolvent taxpayers to exclude canceled debts. So unless you have a positive net worth, you probably won't need to pay taxes on your settlements. And even if you did, so what? You'd be paying taxes because you saved a bunch of money off your debts! And this is a problem?



"Collection activity will continue and you might get sued."



Yes, if you fall behind on your bills, your creditors will most certainly continue attempts to collect what's owed, and one or more of those creditors might sue you in civil court. But again, this criticism totally misses the mark. Collection activity is already a function of being in debt trouble. At least debt settlement allows the consumer to use the collection process to eliminate debt through negotiated compromises. Even lawsuits need not be cause for panic, since they can often be settled out of court. The only reason to allow a legal action to proceed to the point of wage garnishment, property lien, or bank levy is lack of financial resources with which to settle. And if that's the case, the debtor should be talking to a bankruptcy attorney anyway.



In contrast, let's look at some of the positives of debt settlement.



1. You can save $1,000s versus any other method of debt elimination (except for Chapter 7 bankruptcy, which is much more difficult to accomplish now that the new law is in effect).



2. You can get out of debt in 2-3 years, and much faster if there is some available home equity to work with. This is a lot better than 5 years in the financial boot camp of Chapter 13 bankruptcy, or 5-9 years in a credit counseling program.



3. You keep control over the process more than with any other approach.



4. You maintain personal privacy. With bankruptcy, your case file becomes a matter of public record, easily located via Internet search by future employers, landlords, or creditors.



5. You retain your dignity while working through your financial problems. Bankruptcy still feels like failure to a lot of people. Debt settlement represents an honest and ethical alternative to that extreme solution.



6. You can adjust your monthly funding into the settlement program up or down depending on real-world conditions in your financial life. If your income fluctuates from one month to the next, or you get hit with an unexpected expense, it won't torpedo the whole program. The built-in flexibility of debt settlement gives it a huge advantage over other options, all of which require a fixed monthly payment.



Once you're made the determination that debt settlement makes sense for your situation, you'll need to decide whether to go it alone or seek professional assistance. For people who aren't easily intimidated, there's no question that the do-it-yourself approach is the way to go. For others who can't handle the least bit of pressure or just want to focus their time and energy elsewhere, hiring a professional settlement company may be the correct choice.



If you do decide to take the do-it-yourself approach, follow these tips:



* Use a privacy manager on your telephone service to screen creditor calls so that you only speak to creditors when you're ready.



* Make sure you have a solid game plan for building up money to settle with, and set the funds aside in a separate bank account.



* Do not send settlement funds until you have the deal in writing. No exceptions!



* After paying the settlement, follow up to obtain a zero balance letter from the creditor, so you don't have bogus collection problems later on.



* Know your rights as a consumer by reading the free resource articles on debt, credit, and collections at the Federal Trade Commission website: www.ftc.gov



* Don't be intimidated or pressured into accepting a settlement deal that you can't handle.



Remember, thousands of people settle their own debts every year, without the need for lawyers or bankruptcy. You can do it too if you're disciplined, determined, and prepared to ignore some of the crazy stuff that bill collectors say. When you're finally debt-free, you'll feel a lot better about having worked it out on your own. Good luck on your road to debt freedom!

New business loans: making way for opportunities8

Author: Shaun Smith

Source: articlesbase.com



In the present circumstances, starting a new business will always be a risky proposition. But if you are convinced about making profits from business, then nothing can stop you from taking the risks. However In these depressing conditions, it is unlikely that you will be able extract funds, so as to invest as capital. Even then, you can derive substantial amount of finance and for that you can rely upon new business loans. These loans are designed to provide the capital, which will enable you to take care of the various expenses pertaining to your business needs. It does not matter if you are dealing with business of small, medium or large scale. It can be used to serve a number of purposes, such as: - purchasing raw materials and good, leasing commercial site, expanding business interest, paying wages, installing new machines and equipments, etc. Prior to the availing of the loans, you must prepare a lay out of your business proposal. You have to clearly mention the details about the type of business you are engaged in, the amount required and its purpose, approximate repayment schedule, gross annual income etc. Apart from these, lenders may also ask for documents such as ownership details, tax returns, financial statements from banks, credit references etc. once these details are verified and found to be satisfactory, the approval comes in an instant. You can avail these loans in secured and unsecured form. Secured form of the loans is meant for those who are looking for a bigger amount. But to avail the loans, you will have to place one of your existing properties as collateral. Unsecured form, on the other hand can be availed without attaching any asset as collateral. This option of the loans is beneficial for those who are in need of smaller amount. It is available for a short term period and due to its collateral free approval, the interest rate levied is marginally high. Prior to the availing of new business loans, it would be optimal to compare the free quotes. In this regard, you can use the online services from where you can collect the quotes of various lenders for free. By doing so, you will be able to get the loans at more affordable rates.

Shaun Smith has been associated with Business Start up Loans. His articles provide you useful knowledge to find the right financial product at the right price. Please visit here for more informatio on new business loans, business loans and business startup loans.

Small Business Debt Settlement - How to Use Credit Card Debt Settlement to Settle Your Debt

Author: Erik Stump

Source: ezinearticles.com



The Global meltdown has affected the banking system, stock market, financial institutions and l business owners. It is a global crisis and had devastating effects. Large business houses and financial institutions looked up to the government to provide them respite through financial bail out packages. During such serious financial crisis business owners ran pillar to post for the payments. Most of the small entrepreneurs were looking forward to filing bankruptcy due to serious debt condition. The conditions arose due to non payment of wage bills, non payment to contractors etc. For small business debt settlements is another way out to save their credit file marginally.

Businessmen are facing high interest rate on unsecured loans and credit cards. They need to know through the debt settlement process they can reduce the overall debt bill by 60% and the interest rate for payment can also be lowered down. The debt settlements company negotiates with the creditors and asks them to waive off the extra interest charged on the account. He also informs them that the entrepreneur is looking forward to filing for bankruptcy.

In case of bankruptcy the creditors would not get any payment. Therefore to retrieve the basic cost invested they lower down the overall debt bill and the interest levied on it. To get a good deal the businessmen should go through a company with good track record and negotiation skills.

The Debt settlement network is a good forum which has the affiliation from some of the best debt settlement companies in the market. Most of the companies have large experiences and provide free consultations. They charge fee only when the negotiation process with creditors is done. Therefore to avoid bankruptcy and to consolidate debts small business debt settlement is a good option for the business owners.

If you want to get out of debt and hire a debt settlement company for debt negotiation then I have an important piece of advice. Do not go directly to a particular debt settlement company but rather first go to a debt relief network who is affiliated with several legitimate debt companies. In order to be in the debt relief network, the debt settlement companies must prove a track record of successfully negotiating and eliminating debt. They must also pass an ethical standards test. Going through a debt relief network will ensure that the debt company you are provided with is a legitimate and respected company. This is the most efficient way in finding the best debt settlement companies and increasing your chances of eliminating your debt.

FreeDebtSettlementAdvice.com is one of the largest and most respected debt relief networks on the marketplace today. To find a debt settlement company through FreeDebtSettlementAdvice.com check out the following link:

Legitimate Debt Settlement Company

Three Dumbest LLC Formation Mistakes

Author: Stephen L. Nelson, CPA

Source: articleage.com



I see a lot of dumb llc formation mistakes. Maybe more than most people because I occasionally teach a graduate tax class on LLC formation.



Some of the mistakes are made by entrepreneurs and investors trying to save money on accountants and attorney fees. And I guess that's okay--albeit penny-wise and pound-foolish.



But you know what really irks me? Some of these mistakes—in fact, most of them—are made by attorneys and paralegal services… Professionals who should know better.



But enough whining. Without further fanfare, here are the three dumbest mistakes that I see people make again, and again, and again.



Mistake #1: Forgetting about Foreign LLC Registration Rules



Read those tempting advertisements for Delaware or Nevada limited liability companies? The advertisements sound pretty good, but most small businesses shouldn't use out-of-state llcs or for that matter out-of-state corporations.



Here's why: If you're doing in business in, say, New York, you're not going to be able to avoid state taxes by forming your llc in, say, Nevada. The tax and corporation laws in your state will require you to register your out-of-state, or foreign, llc in the states where your business operates. Those same laws will require you to pay state income taxes in the states where you earn your income.



A couple more quick points: Large businesses do like Delaware for a variety of reasons—mostly having to with how sophisticated the Delaware chancellery courts are. But this applies to really big businesses that will litigate in Delaware—not small businesses. And Nevada does offer corporations a no-income-tax haven—but you need to set up a real business presence there, with an office, employees, property—the whole enchilada.



Mistake #2: Electing to be Treated as a C Corporation



An llc is a chameleon for tax purposes. Which is great. An llc with a single owner can be treated as a sole proprietorship, a C corporation or an S corporation (assuming eligibility requirements are met.) An llc with multiple owners can be treated as a partnership, a C corporation or an S corporation (again, assuming eligibility requirements are met.)



But just because you can do something doesn't mean you should. And unless you've got expert tax advice from an attorney or certified public accountant, you shouldn't make the election to be treated as a C corporation.



A C corporation is taxed on its profits. When those profits are distributed to shareholders, the profits are taxed again to the shareholders. By electing to be taxed as a C corporation, then, the llc owners create an extra level of taxation. Bummer.



Mistake #3: Electing to be Treated as an S Corporation Too Early



Llcs can also elect to be treated as S corporations—as noted in the preceding paragraphs. And once a business generates profits well in excess of the amounts paid to owners for salaries, an S corporation election saves the owners big money--sometimes tens of thousands of dollars per owner per year.



But you don't want to elect S corporation status too early--especially if the llc is owned and operated by a single owner.



By electing S corporation status, the llc needs to file an expensive corporate return, needs to begin doing payroll--even if the only employee is the owner, and may need to pay additional payroll taxes like the 6.2% federal unemployment tax. (This tax is levied on the first $7,000 of wages paid to each employee.)



Wait until your business is profitable to elect S status for your llc. You patience will pay off in two ways: simpler accounting and less expensive tax returns.

To Legally Save Thousands of Dollars a Year in Taxes

Author: Roberto Neuberger

Source: free-articles



How To Legally Save Thousands of Dollars a Year in Taxes


By Alex Goumakos


Someone once remarked, "Next to being shot at and missed, nothing is quite so satisfying as an income tax refund." There's no question that saving money in taxes is high on everybody's list of financial priorities, especially self-employed business

owners.


However, unlike individuals who work as employees for an employer, business owners actually have the "luxury" of choosing how much in taxes they pay each year by picking one form of business entity (sole proprietorship, partnership, corporation, etc.) over another.


Unfortunately, the majority of business owners choose a business entity once (usually when starting out) then keep the same entity for the life of the business. This isn't necessarily the smart thing to do.


While some companies can get away with sticking with the same form of business throughout the life of the business, countless others are just simply throwing money out the window by overpaying their taxes. For some small business owners, this "financial nonchalance" can actually cost an extra several thousand dollars in unnecessary and avoidable taxes each year.


If you are a business owner concerned about reducing your tax liability, here's a way you can dodge the tax bullet by utilizing what's known as a Subchapter S corporation:


First some background: When starting a new business most business owners focus on simplicity: that is, the less paperwork and regulations to contend with the better.


What this means is that most new businesses start out as "unincorporated" entities such as sole proprietorships (73%) and partnerships (6%). While management and administrative costs of running the business might be easier and less expensive initially, the tax burden, especially the self-employment tax, can be anything but.


For many business owners who wait till year-end to do their tax planning (or no tax planning at all), the self-employment tax is an unwelcome surprise...and a very large expense. Newly self-employed individuals are shocked even more once they realize that they are responsible for the self-employment tax all on their own. That's because when they worked as an employee their employer was responsible for paying one half of the self-employment tax.


The self-employment tax is simply a version of the same Social Security and Medicare taxes you pay as an employee. However, instead of paying 7.65% as you do when you're an employee, as a self-employed business owner you have to pay double: 15.3%.


In 2002, the Social Security portion (12.4%) is levied on the first $84,900 of net profits. There is no limit to the edicare portion (2.9%). Self-employed individuals are also entitled to a one half-credit of the tax. As an example, a self-employed individual with $100,000 in net profits in 2002 would be required to pay $12,400 in self-employment tax. This tax is in addition to federal, state and local taxes!


Here's what you can do to save money on the self-employment tax


Incorporate and elect Subchapter S status. You can elect Subchapter S status even if you have a pre-existing C corporation too. Operating your business as an S corporation is one of the very few four leaf clovers still left in the tax code.


The reason for this is simple: The net income from an S corporation is NOT subject to the self-employment tax.


If structured and implemented properly, an S corporation could save you thousands of tax dollars per year. As an employee- shareholder of your S corporation, you pay yourself wages just like you would any other employee. But instead of taking profits out through payroll, you take cash distributions called "nontaxable dividends".


Nontaxable dividends are called nontaxable, because they aren't double taxed like the dividends paid to shareholders in a regular C corporation. You're still paying taxes on the net income of your S corporation when you file your personal tax return, but the tax is federal tax and not the self-employment tax.


For the sake of simplicity, if an S corporation with $100,000 of net profits pays its owner a reasonable salary of say $50,000 and non-taxable dividends of $25,000, the tax would be $7,650. This is a whopping $4,750 savings in tax! Even if you factor in additional costs such as workman's comp insurance, incorporation costs, professional fees and incidentals, the savings is still more than adequate.


The key to the whole scenario is that your salary must be reasonable under the circumstances surrounding your business. It's also much better for salary justification purposes if your business is not limited to the delivery of personal services by you. Nevertheless, incorporating and electing Subchapter S status is an excellent way to reduce your overall tax burden.


Here's more good news: If you happen to already own a regular C corporation and you live in a state that has a high corporate income tax rate, you'll come out ahead even more if you elect S status. Additionally, if you have children aged 14 or older, you can save even more taxes by giving them shares in your S corporation and having them pay the tax at their lower tax rates. By giving away shares you also reduce your estate tax obligation.


So you see, there are plenty of good reasons to incorporate and elect S status. I've only touched on a few minor points. There are many, many other valid reasons to incorporate. Just keep in mind that you should always consult with your tax advisor for your particular needs and circumstances before making any important business or financial decisions. Besides taxes, there are many legal and financial issues to contend with as well. Always look before you leap.


When it comes to your business, you should make it a point to assess the validity of your type of business structure on a yearly basis. Incorporating is definitely not just for startups. There are plenty of unincorporated businesses that are missing the boat when it comes to saving money. Don't be one of them. It pays to find out more.


Alex Goumakos is a CPA, business advisor and guest consultant of Active Filings LLC, a company that provides incorporation services in all US. (http://www.activefilings.com). Alex can be reached by email at mailto:alex@activefilings.com

Fixing Tax Debt Problems

Author: Ross Hudgens

Source: articlesbase.com



Borrowing money and again disturbing to pay it aback is something a lot of humans accept faced at one time or another. Owing anyone can be an afflictive bearings even beneath the best of circumstance. Discovering that you owe the accumulating bureau of the United States Government - the IRS - can alarm even the stoutest person. Tips for Dealing with Tax Debt Do something now - tax debt is not traveling away. Blank belletrist from the IRS will not get them to leave you alone. If you do not accord with the tax botheration again the tax botheration will yield affliction of itself (often in the anatomy of levies on coffer accounts, allowance garnishments or even a appointment from law enforcement). Get your bearings - compassionate area things angle may go a continued means appear abstracted your nerves. You can acquaintance the IRS anon or you can plan with a tax professional. Be abiding you yield bright and audible addendum of who you allocution to, if you allocution and what is said. Start paying as anon as accessible - any accumulating that sees you are aggravating to accomplish things appropriate is added accommodating to plan out transaction affairs and even reductions. The IRS has the aforementioned attitude if it comes to humans who are aggravating to pay their tax debts. Even if you are not in a position to pay the tax debt in abounding again you should try to accomplish a abundant down transaction on the bulk that is owed. Accomplish a new plan â€" try to accomplish arrange to activate paying off the tax debt and the eventually the arrange can be fabricated again the bigger off you will be. Problems appear and blank them will not accomplish them go away. Tax debt will chase you and abide to abound until you actuate to accord with the issues. Facing up to IRS tax debt is the alone way to activate acclimation tax problems that you accept in your life.

Ross H is a writer for Orange County Tax Help. Use Orange County Tax Help to solve your tax debt problems.

Understanding IRS Wage Garnishment Laws

Author: G.C. Roy

Source: download



Wage garnishment laws have been passed by states as well as the federal government. The purpose of these laws is to provide a way for debts owed to creditors to be recovered. IRS wage garnishment is the most common application of these laws.
Garnishments against wages can be levied by any agency and is not limited to the IRS. Private creditors, federal government departments, or even an ex-spouses can claim garnishment of the money overdue. Garnishments can also be in cases of overdue child support expenses. For most agencies apart from the IRS, a court order is required to enforce the garnishment law.
Garnishment is taken as a part of the payroll process. An order of importance been stipulated by law. According the garnishment law, the garnishment due to towards the federal government is to be collected first. Thereafter the money due towards state tax or local tax jurisdictions will be collected, and lastly garnishment for credit cards and other private debts will be paid.
Garnishment law in some states like Pennsylvania, North Carolina, Texas, etc do not allow wage garnishment at all except those related to taxes, child support, court order fines, and federally-guaranteed student loans. Other states allow all kinds of garnishments, even those levied by the private creditors. In some states garnishment law states that a maximum 25% of the disposable earnings can be levied as an amount due towards payment.
The money withheld by an employer from any individual's paycheck is handed over to the creditor or the agency towards which the amounts is due. As per the garnishment law, the wage garnishment remains in effect during each pay period until the total amount due is paid in full. That is not necessarily true in the instance of an IRS wage garnishment. An offer in compromise can be negotiated, or a payment plan can be agreed upon. Most tax professionals can get the IRS to agree to a provisional release of the levy against wages based upon a negotiated agreement.
According the wage garnishment law, an individual's salary, wages, or other income can be levied. Garnishment law prevents the employee from being fired from his or her job. If the employer fires the employee because of garnishment proceedings, then it is violation of garnishment law. The employer can be fined for doing so. The Wage and Hour division of the Department of Labor determines the violation of the law. The IRS does not do this job.
Greg Roy has experienced the financial pain of an IRS wage garnishment first hand. To learn more about negotiating with the IRS and getting a wage garnishment released, visit http://IRS-wage-garnishment.com.