The debt load of Rhode Island is quite high, with a total of $9.29 billion US dollars owed in the 2019 fiscal year. Debt at the state and municipal levels is equally high, at $2.68 billion US. This is why the Rhode Island Debt Relief is necessary.
Debt relief is an option for Rhode Island individuals who are drowning in unsecured debts. Like credit card bills, medical expenses, and personal loans.
People in Rhode Island can use debt relief to bargain with their creditors and pay off their debts for a fraction of the original amount owed. The goal of such negotiations is to have the debtor pay an agreed-upon sum. With the remaining debt being waived by the creditor.
The most convenient form of payment is an up-front fee; however, installment plans are also possible. The Debt relief offers are accepted by creditors even if they are not required to do so by law.
Debt Categories That Can Be Settled
Debt relief can be used for many different kinds of unsecured debts. They are;
- Credit cards
- Department store cards
- Signature loans
- Payday loans
- Personal lines of credit
- Private student loans
Advantages and Disadvantages of Debt Relief
The advantages of debt relief are
- Debt relief can help you save a lot of money by lowering your total debt.
- Engaging in debt relief can help you get away from the problem of having to deal with collection calls and the need to file for bankruptcy.
- Late fees and penalties are often waived, lowering the overall debt owed.
- A structured settlement plan allows you to pay off your unsecured debt, usually within three years.
- Debt relief plans often involve a single monthly payment that is manageable for the majority of people.
Disadvantages of Debt Relief
- Because it entails not paying the full loan amount, debt relief might have a negative effect on your credit score.
- If you settle your debt and save more than $600, you may have to report and pay taxes on the excess money saved.
- Once a settlement agreement has been made, all parties involved are legally obligated to abide by its provisions.
How a Debt Relief Program Can Help You in Rhode Island
- The process of resolving debt might be more organized with the help of a qualified debt relief company. They may provide you with practical timelines and estimations for settling with creditors. Which can save you a lot of time and money.
- With the help of a reputable debt relief program, you can eliminate your debts within two to four years. Having minimal effect on your credit rating and financial standing in the meantime.
- When you consult a lawyer who specializes in debt relief, they’ll take a look at your finances and let you know whether debt settlement or something else, like filing for bankruptcy, is the better option for you.
How to Handle Debt Relief Negotiations Yourself in Rhode Island
If you’d rather handle your own debt relief negotiations, here’s what you should do:
Step 1. Set a budget
Before talking to your creditors, you need to know how much you can afford to offer them.
Step 2. Set a Settlement Fund
Establish a Settlement Fund by opening a new bank account and making consistent deposits until you have enough for a fair settlement offer.
Step 3. Mention the Bankruptcy
Mentioning bankruptcy to creditors, even if you are not seriously considering it, can motivate them to make a deal, especially with unsecured lenders.
Step 4. Start with a Low Settlement Offer
If you want to settle for less than half of your initial debt, a low settlement offer at the beginning of discussions is a good strategy.
Step 5. Get a Written Agreement
Make sure you have everything documented in writing, including the agreed-upon payment amount, the amount waived, the repayment terms, and the impact on your credit report, once an agreement has been made.
Step 6. Pay the Settlement Amount
When a settlement has been reached, you should pay the agreed-upon sum as soon as possible so that your debt is officially discharged.
Debt Relief and Its Tax Consequences in Rhode Island
There may be tax consequences for settling debt. The Internal Revenue Service (IRS) may treat debt forgiveness from debt relief or creditor write-offs as taxable income if the amount of the waived debt exceeds a certain threshold.
After a certain amount of time has passed, creditors can legally “write off” the debt and declare it as a loss on their tax returns. Creditors are required to inform the IRS of any amounts forgiven as part of a debt settlement.
Any debt cancellation or forgiveness of $600 or more in principal during the tax year will result in a Form 1099-C being issued to you and the IRS. Then, in your tax return for that year, you must include this sum.
You might not have to pay taxes on the amount waived if you were considered incapable of paying your debt on the day before your debt was written off. Waived debts under $600 also do not result in taxable income.
Statue of Limitations of Rhode Island Debt Settlement
A creditor in Rhode Island must bring suit to recover a debt within the time period set by the state’s statute of limitations, as is the case in every other state.
In Rhode Island, the statute of limitations varies from three to ten years depending on the nature of the debt. Notably, the statute of limitations for mortgage, medical, and credit card debt is 10 years. While the statute of limitations on auto loan debt is only four years.
Knowing whether or not a debt collector can legally sue you depends on the statute of limitations that applies to your particular debt.
Do not commit to any payment plans if you have been sued in Rhode Island before verifying that the statute of limitations has passed. If the statute of limitations has passed, you should get legal advice and let the court know.
Managing debt can feel overwhelming, but Rhode Islanders do have options for getting their finances back on track. The Rhode Island Debt Relief, whether accomplished through professional assistance or by the debtor himself or herself, can pave the route to financial stability.
The possible benefits and drawbacks, in addition to the tax implications, must be carefully weighed. If you want to make smart choices about how to handle your debt, you should be familiar with the statute of limitations in Rhode Island.
Get some expert advice and check out your choices if you want to get your financial house in order again.
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