Consumer Debt Relief - Pending Government Legislation For Debt Relief in the Recession

Aug. 5, 2010 - PRLog -- Consumer debt relief options have gained wings after the recession and after the Federal government took steps to help the economic units and the economy as a whole to get out of recession. Bankruptcy which has been a long used method of debt elimination was sent to the back foot because analysis showed that it was a major culprit in pushing the economy further back into recession. There were several pending government legislation for debt relief which were executed during the recession and they were declared to be laws!

Well, some of these pending legislation included reduction in the level of the taxes that the government charged on the creditors and giving debt settlement a legal stamp that will help the consumers to trust on the method and avoid bankruptcy. But the main question that haunts is that why did settlement require a legal stamp? This is because of the fact that settlement uses the threat of bankruptcy to force the creditors to eliminate a major portion of the debt that the consumers have. This was considered to be unethical and thereby the method required a legal backup which it received in the times of recession.

The government announced that the creditors who agree for debt settlement deals will be enjoying tax reliefs and they can also use the stimulus money that the government has released in the market for covering up the costs that they have. This was a major help for the creditors as they could now make up for any loss that they incurred by agreeing to the settlement deals. The loss in the profit was covered by the reduction in the taxes and the loss of the principal money is covered by the stimulus cash that the government released in the market. Thus the creditors opened up for debt settlement and this method as one of the consumer debt relief options became popular. Thus the pending government legislation for debt relief were well executed during the recession.

There was yet another pending legislation for debt relief. This was brought into force recently. The amount of the debt that is eliminate from your total dues is now considered to be your taxable income by the IRS. This is because of the fact that you were supposed to pay that amount of money to the creditor but you saved it and therefore it became your income. Hence it is taxable. One thing that you need to know is that the amount of money that is eliminated needs to be greater than $600 to become taxable.

You can avoid this tax if your total debt exceeded the total value of the assets during debt settlement. This means that you need to prove that you were insolvent during the settlement process. If you can, you will not be taxed.

For consumers with over $10k in unsecured debt, debt settlement can be a legitimate way to eliminate a significant amount of that. To find a legitimate company it would be wise to visit a free debt relief network. They will provide free help and point consumers in the right direction whether it is debt settlement or another option. Check out the following link for free debt help:

Free Debt Advice
(http://www.DisputeDebts.com)

Contact us for free debt advice = 8884442820