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Debt Relief and the Federal Government

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The first thing you need to know about debt relief and the federal government is the only types of help it has available for most types of consumer debt are advice and regulations. With that said, there is specific debt relief help for IRS debt and student loan debt. 

Let’s take a look at what’s offered.

IRS Fresh Start Programs

Instituted in 2011, the IRS Fresh Start program is designed to provide assistance to people in arrear with tax debt to the Internal revenue Service. Covering individuals as well as businesses, the Fresh Start program provides a number of different payment solutions to help settle tax debt. 

This is accomplished through one of three approaches. These are working out an Offer In Compromise, implementing Installment Agreements, declaring a debt Currently Not Collectable and Penalty Abatements.

The Offer in Compromise provides qualifying taxpayers with an opportunity to settle a tax debt for less than the outstanding balance. Note we said qualifying taxpayers, because each case is considered on its own merits, taking individual circumstances into consideration. Among them are an individual’s ability to pay, income, expenses and equity they may have in assets. Approvals aren’t guaranteed, but if you can demonstrate paying your full tax liability will create a financial hardship, this is a viable option.

 Installment Agreements are among the most commonly employed tools to help taxpayers settle IRS debt. Qualifying applicants are granted up to 72 months to pay off tax debt. To qualify for an Installment Plan, you must owe $50,000 or less when the fees, interest and outstanding balance are totaled. You must have also filed all of the related tax returns. Interest charges are applied to the outstanding balance, but at least you won’t have to come up with the entire balance all at once. 

If your debt is declared Currently not Collectible, the IRS will suspend efforts to collect and stop and actions against you such as wage garnishments and tax levies. However, any subsequent tax refunds due you will be applied to the outstanding debt. In order for IRS debt to be declared Currently Not Collectible, you must show an inability to pay your taxes and cover your basic living expenses. 

 Penalty Abatement sets aside any penalties associated with your unpaid tax balance. The chief benefit of this is its ability to lower your outstanding balance considerably. 

Student Loan Repayment

Four income-related repayment plans are offered for holders of student debt. These are the Revised Pay as you Earn Plan (REPAYE), Pay as you Earn Repayment Plan (PAYE), Income-Based Repayment Plan (IBR) and the Income Contingent Repayment Plant (ICR).

REPAYE sets your monthly payment as 10% of your income, once all of your basic needs are met. That is, as long as it is less than the payment for which you’d be liable under the standard 10-year repayment pln.

IBR sets your payments as 10% of your discretionary income if you took your loan on or before July 1, 2014. The amount rises to 15% if you took your loan after that date. In either case, the payment must be less than that of the 10-year repayment plan’s requirement.

ICR allows a discounted payment of 20% of your discretionary income for a period of 12 years. At the end of that period, you loan will continue at the regular rate for up to 25 years (in total) after which our debt is forgiven. Recertification of your income is required each year you’re enrolled in the ICR. 

This is an abbreviated look at the plans offered, for more information you’ll find an overview of government debt relief programs at the Freedom Debt Relief website. 

The federal government also provides a wealth of protections for consumers from predatory practices, as well as potentially illicit activities by debt collectors. You’ll find that information at the Federal Trade Commission’s website.

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