Negotiating Debt, Managing your Finances, and Gaining Financial Security

Negotiating Debt, Managing  Your Finances and Gaining Financial Security 

Debt can be crushing.  It can cause people to delay marriages, purchasing of a home, and even decline or delay needed medical treatment. In fact, one of the leading causes of bankruptcy is medical debt.

Many people are unaware that they can negotiate their debt with many creditors. It pays to be aware of the options you may have.

I'm going to review some of these negotiation options with you.

This list is not exhaustive. If you have bills that you're having a hard time managing, don't be afraid to ask your creditor.

Understand how debt default can affect your credit.

It can lead to legal action, including the seizure of property. Don't let this happen to you.

If you have outstanding debt with the IRS, talk to them.

It's important to understand that interest and penalties will continue to accrue on any outstanding balances.

The sooner you speak to them, the better off you'll be.

You may not be able to completely eliminate your debt, but you may be able to get it reduced or set up payment arrangements that will make it more manageable.

Most creditors from the mortgage company to hospitals to loan companies are willing to discuss your situation.

For many people who delayed or did not filed 2022 tax return penalties can accrue at a 5% rate of the unpaid taxes for every month until reach the 25% cap.

Additionally, interest will compound daily at a current rate of 7%.

This interest rate may go higher if the Federal Reserve raises rates.

There is also a late filing payment penalty of 0.05% of the unpaid taxes, an amount that accrues monthly.

You can see how your outstanding debt can increase significantly.

Unpaid taxes can lead to garnishment of wages.

Money can be taken from your checking and savings accounts.

And the IRS can seize real estate and vehicles.

If you owe delinquent taxes, contact the IRS and set up a payment plan.

If you don't have the income or resources to pay taxes, taxpayers can apply for an offer of compromise which can reduce the overall tax liability.

Another option is to ask the IRS report the debt as currently not collectible.

This will temporarily suspend certain collection actions as a seizure of property.

This action does not erase debt and it will also continue to accrue interest.

I would caution taxpayers to be of scammers that say they offer assistance with the IRS.

Do your due diligence. The collections process and penalties assessed  vary greatly depending on circumstances.

Many people are unaware that if you live in a federally declared disaster area or are a member of the military serving in a combat zone, exceptions can be made.

Mortgage Debt.

Many people remember that many homeowners have found themselves upside down on their mortgages in 2008, 2009.

Consequently, many lost their homes.

According to the New York Federal Reserve Board in the last quarter, 0.57% of all mortgages were seriously delinquent.

There is a concern that with the rising interest rates, along with higher house payments, delinquency levels may rise in the coming years.

Homeowners who are significantly behind on their mortgage payments should contact their mortgage servicer immediately.

Describe your situation and how you're planning to repay what is owed.

Missing mortgage payments will hurt your credit score.

So consider asking your loan service for a loan forbearance which will pause or reduce your mortgage payments.

The missed payments, which are due at the end of the term, will include interest during the forbearance period.

You can also ask for a repayment plan arrangement.

Also, some workers will offer a payment deferment in which the missed payments are added to the end of the home loan.

The homeowner must be aware that if the mortgage debt continues to accrue, the loan servicer may push the homeowner to sell the property

Credit card debt.

In an environment where interest rates are rising, credit card holders can find themselves in trouble when their purchases and interest charges snowball to the point where they can't make the minimum payments.

It may pay to seek help from the National Foundation for Credit Counseling.

It’s a collection of nonprofit member agencies that help consumers develop a plan to both reduce their living expenses and pay outstanding debt.

The counselors work with your credit card company to make the payments more affordable.

The payments are made to the agency which disperses the money to the creditors.

The credit card companies may vary in their assistance.

Consumers will need to provide documentation of the extenuating circumstances that led to the debt.

You can also reach a credit card company yourself and save money on fees and negotiate with them directly.

Student loan debt.

Many older people are finding that they're holding student loan debt for adult children.

Also, student loan holders find themselves in limbo, waiting for the Supreme Court to rule on the legality of President Biden's plan to forgive up to $10,000 per person in federal loans and up to $20,000 in federal loans to borrowers who also received Pell Grants.

Borrowers can assess  whether their monthly payments are still manageable once the policy ends.

If not, contact the loan services and inquire about deferment and or forbearance options, as well as other repayment plans.

Medical debt.

Almost a quarter of all U.S. adults say they have passed new medical bills, including bills they can't afford to pay according to the Kaiser Family Foundation.

There are options to help manage the burden of medical debt.

One of the first things a person can do is prepare for the cost of a procedure.

Ask about the cost as soon as possible.

Also, sure you understand your insurance and what it will and will not pay.

Thirdly, make sure your medical bills are accurate.

Upwards of 80% of medical bills are incorrect.

Don't a bill unless you've verified the itemized expenses with the evidence of benefits statement.

If there are errors, you can file an appeal.

Many hospitals have charitable programs to help patients cover medical bills.

They can also help you establish a payment plan to pay your outstanding bills.

You can ask if the bill could be reduced to an amount you can afford to pay.

It doesn't hurt to ask.

Be prepared to provide documentation such as proof of income, insurance, disability, and even your proximity to the facility if travel expenses significant.

Patients can apply for grants to the Patient Advocate Foundation and other nonprofit organizations.

Funding comes mostly from private donations and health related non-profits devoted to specific ailments such as Leukemia Lymphoma Foundation.

Some health care providers offer medical credit cards to their clients that come with no or low interest introductory rates that will later reset to a high rate.

Consumers should be aware that these rates may be higher than that of the regular credit card rates.

It pays to take this into consideration before signing on the dotted line.

Don't be afraid to ask for help with any of your creditors.

Getting control of your finances will reduce financial stress and allow you to focus on more important things in your life.