Debt forgiveness programs help people who are in the midst of a financial crisis. If you enroll in a debt forgiveness program, the program works with your creditors and helps you set up payment options that are much more suited to your finances now. Most of the time, you can pay off your debts for a fraction of the amount you actually owe.
Student Loan Forgiveness
If you just graduated from college or at least still have a high balance of student loans hanging over your head that you feel is impossible to pay off any time soon, you may be eligible for a student loan forgiveness program. These programs are not available to everyone. Several of the professions that do work with student loan forgiveness are teachers, people in the medical field and lawyers. The way you will receive debt forgiveness is to work in the field, usually with low pay or maybe in a place that is not your first choice. For example, many teachers that receive student loan debt forgiveness work in low-income schools, daycare facilities, with disabled children, or wherever there is a real need. Lawyers often work in the area of public interest. You may have to work in one of these areas for a certain amount of time to receive debt forgiveness.
In some circumstances, you may receive debt forgiveness for your mortgage. Many times people who have had their homes foreclosed fall into this category. Unfortunately, one of the down sides to having a debt forgiven is that you may be required to claim the forgiven portion of the debt as income on your taxes. For example, if you owed $50,000 on your mortgage, but only paid $10,000 before it was foreclosed or forgiven, you may have to claim the $40,000 difference as income on your tax forms. If you have any debt forgiven and you need to claim it, you should receive form 1099-C in the mail with the forgiven amount listed.
Credit Card Debt
Credit card debts are perhaps the most popular debt that people join debt forgiveness programs for, especially if you have multiple credit cards. The reasons you cannot pay your credit card debts may vary from loss of job or income to simply living beyond your means. Either way, you can work with a debt forgiveness program that will enable you to make one lump sum payment at a much-reduced rate. Here again, you may have to pay taxes on the amount of debt forgiven.
Debt Forgiveness Companies
There are plenty of debt forgiveness companies with whom you can work. For some companies you have to have a certain amount of debt before they accept you into the program. These types of programs work best for people who have a lot of debt on multiple credit cards or loans. If you only have a couple of credit cards and cannot pay due to loss of job or lessening of income, you may be able to work directly with the lender yourself. If you call and explain the situation to them, they may be willing to help you by forgiving a portion of the debt, removing interest or at the very least lowering the interest rate.