When you're dealing with IRS debt, you may find that you're dealing with a slew of other financial issues.
However, as I sat down to write this strategy note, it reminded me of numerous Charlotte clients I've worked with over the years who have successfully fought their way out of debt that would have devastated other Charlotte families.
How did they manage it? I'll tell you today.
Here's something they didn't do, though: Borrow money to pay off even more debt (and call it savings).
Apparently, that only works for Uncle Sam.
In general, I'm a huge fan of automation when it comes to these challenges - but not always. Do not, for example, use off-the-shelf software to "automate" your tax preparation process. Especially the “unrestricted” variety. I've heard so many firsthand accounts from clients, and I've had to clean up so many mistakes produced by these tools (and their users! ), that I can't promote them with a clear conscience.
Yes, I am clearly biassed. However, facts are facts. Take a look at this, for one small example:
http://www.customerservicescoreboard.com/TurboTax
So, let's speak about how I help my clients get out of debt.
“What simple action could you take today to produce a new momentum toward success in your life?” – Tony Robbins
As of August of this year, the average credit card load for an American family was $7,135, an increase over prior years and not something that any of us would like to see continue to rise. And that's just for debt-free households; the number for those who *do* is significantly higher.
You could be in a better circumstance, but you could also be in a worse one. So, in response to the questions we frequently receive from clients in distress, I've put together a step-by-step plan for you that has proven to be effective in helping Charlotte residents pay off large sums of credit card debt.
Even if you stop using your card, if you only pay the minimum amount each month, your charge may continue to rise. This is referred to as "negative amortisation," which occurs when you believe you are making payments on your debt but the additional fees and finance charges exceed the minimum payment. The bottom line is that if you only pay the minimum, you will soon be in over your head in debt.
**Note: If you're negotiating with the IRS for an Offer in Compromise or a payment plan, this might not be the ideal method.
There are great methods for ensuring you don't make mistakes due to administrative complexity, such as internet banking and automatic payment alternatives. If you don't think you'll be able to keep track of all your bills with pen and paper, there are several effective software tools available to help you keep track of your finances. It's straightforward: Your credit score can be improved by paying your credit card bill on time. If you don't pay your credit card bill on time, your credit score will suffer.
Negotiating with your credit card company does not require you to be an attorney or other expert (negotiating with the IRS, on the other hand, is a very different issue!).
Because of the rising level of consumer debt in the United States, creditors have realised that they must be more understanding of their consumers if they are to recover any money. They know that if you file for bankruptcy, they'll get pennies on the dollar at best, so they're generally eager to work out a deal.
It is always beneficial to communicate openly. Credit card businesses are frequently disregarded, and overdue files are sent to a collection agency. As a result, they'll appreciate your candour in contacting them and may be more sympathetic to your predicament. Dealing with your debt problem head on, rather than burying it, can not only help your financial situation, but will also make you feel better about yourself.
Even if you can't pay off your credit card in full each month, you should pay something to remain on top of it. So that you know exactly where you stand, you should work off of a written budget. Some experts recommend dividing your monthly debt budget by the proportion of total debt each payment represents and paying that amount.
Here's an example of what these professionals recommend: If you owe a total of $1,000 on two credit cards, one of which is $800 and the other $200, and you only have $100 to pay that month... You could pay $80 toward the $800 debt and $20 toward the $200 debt. You are reducing each loan by the same percentage this way.
Some creditors have been conditioned to be harsh and outright cruel, regardless of how forthright and honest you are. Keep on and don't be intimidated by their techniques.
Warmly,
Sara F Gonzalez, EA, CTR
(704) 599-3355
Kohari & Gonzalez PLLC