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Debt Relief Glossary

ABA

American Bar Association. This is an association showing that someone is legally a lawyer.

Accrued Interest

Accrued interest is the amount of interest that has built up since the last time an interest payment was paid.

Arrears

Arrears is a legal term meaning that part of a debt is behind one or more payments. If a debt is “in arrears” that means the debtor is behind on at least one payment.

Asset Seizure

Asset seizure refers to the government or another legal entity taking ownerships of an asset in order to repay an unpaid debt.

ASTPS

American Society of Tax Problem Solvers

Bankruptcy – Chapter 7 (for consumers)

Filing for bankruptcy means that you are unable to pay off outstanding debts. Chapter 7 proceedings usually last between three to six months. Property can potentially be seized and sold to pay back some or all debts. Typically your home, car and clothes are some of the things that cannot be seized. Many times unsecured debt can be wiped out with a chapter 7 bankruptcy.

Bankruptcy – Chapter 13 (for consumers)

Individuals with a reliable source of income are allowed to file for Chapter 13 bankruptcy. This option allows the debtor to work out a payment plan with the court according to the sentiment of creditors and the amount of income he or she has.

Collateral

Collateral is something that is pledged as a way for creditor to obtain repayment for a loan in the event of a default.

CPA

Certified Public Accountants have passed specific courses and certifications that signify that they are capable and qualified to help individuals and corporations with their accounting activities. They are members of an officially accredited professional body of accountants.

Credit Counseling

Credit counseling is a necessary part of filing for bankruptcy. Federal law requires individuals that file for bankruptcy to take these courses from a certified agency that will educate them about finances and how to properly spend and use money. These courses also help individuals develop a solid financial plan for the future.

Credit Report

A credit report outlines an individuals credit history and lists different financial actions that make up someone’s financial history.

Credit Score

Your credit score is a number that allows lenders to gauge how much of a risk someone is to lend money to. Many factors are taken into account to determine a credit score and some of those include: payment history, numbers of loan accounts, spending habits and more. There are 4 major scores that lenders look at: Equifax, Experian, TransUnion and FICO. Some lenders are moving towards non-traditional credit scores as well.

Currently Not Collectible

When someone is too financially strapped to pay a tax debt, they can apply for this status to stop the IRS from collecting the debt right away.

Debt Consolidation

Debt consolidation is the process of combining multiple loan accounts in to one loan account in order to take advantage of lower interest or to make it easier to keep track of payments. An individual will take out one loan to pay off other loans.

Debt Settlement

Debt Settlement is the process in which a debtor and a creditor agree upon a reduced amount that the debtor will pay back to the creditor. Settlement is usually an option after multiple payments have been missed and the debtor is struggling to pay back the full amount owed. Other names are debt arbitration, credit settlement or debt negotiation.

Deferment

Loan deferment allows a debtor to delay the repayment of a loan to a later date.

Dependent Student

A dependent student is someone that is in school, under the age of 24 and they still have access to support from their parent or parents.

Enrolled Agent

An Enrolled Agent is an individual that is authorized by the federal government to work with the IRS on behalf of a taxpayer. Their credentials are recognized throughout all 50 states and they can work anywhere in the country. This is the highest credentialed award in the IRS.

Extended Repayment Plan

This repayment plan generally requires a borrower to repay at least $50 a month over a period of up to 30 years, depending on how much was borrowed.

FDLP

Federal Direct Loan Program. This program allows individuals to borrow student loans from the government, rather than from a private organization.

Innocent Spouse Relief

The IRS offers relief to individuals that have not had any tax issues but are married to someone that has had, or does have, tax problems. Only the individual with the tax issues can be fines or have assets collected. The innocent spouse is protected.

Installment Agreement

An installment agreement is when the IRS allows individuals that can’t pay their full tax debt upfront to pay the debt in monthly payments.

Interest

Interest is the amount a debtor will pay for the ability to borrow money from a lender.

Interest Rate

An interest rate is the percentage of a sum of money borrowed that will be charged for the use of the money.

IRS

The Internal Revenue Service. The IRS is a government entity designated to collect taxes.

IRS Audit

An IRS Audit is when this government entity looks into the accuracy of an individual’s or corporation’s tax returns.

Joint Tax Filing

Joint tax filing is a tax status for couples that have married before the end of a tax year.

Loan Delinquency

Loan delinquency is when a debtor has missed one or more payment to a creditor.

Loan Default

Defaulting on a loan means that a borrower has not met all the legal obligations of paying back a loan to a lender. This can happen when a scheduled payment of interest or the principal has not been paid.

NAEA

National Association of Enrolled Agents

NATRC

National Association of Tax Resolution Companies

Offer in Compromise

An Offer in Compromise, or tax settlement, is similar to a regular debt settlement. This allows a debtor that can’t repay the full amount to repay an amount less than the total owed. This deal is negotiated with the IRS.

Payroll Tax

A payroll tax is a tax that is required that an employer pays when they pay the salaries of employees.

Penalty Abatement

In certain circumstances of hardship individuals can have penalties related to late filing of a return, late payment of taxes or late deposits removed.

Principal

The principal is the amount of money borrowed, not including the amount of interest that is owed.

Repayment Period

The period, or amount of time, in which an individual repays a loan.

Repayment Schedule

A repayment schedule outlines the interest rate, total repayment obligation, monthly payment, payment due dates and the term of the loan.

Secured Debt

A secured debt is a debt that is backed up by some type of asset as collateral. If the individual defaults on a loan, the creditor can recover the asset as a means of repayment. Types of secured debt include a mortgage payment, car payments or savings account.

Tax Attorney

Tax Attorneys specialize in tax law. They have passed the bar exam and excel at helping individuals work through tax problems with the IRS.

Tax Levy

A tax levy is a legal seizure of property that a government body puts in place in order to recoup debts owed.

Tax Liability

Tax liability is the amount of taxes owed. The number is calculated by applying the rate to the tax base.

Un-filed Taxes

Un-filed taxes are when taxes have not been filed and turned into the IRS.

Unsecured Debt

An unsecured debt is one that is not back up by some type of asset. This means that in the event of a loan default, the lender generally cannot seize assets to recoup lost funds. Some examples include: credit card debt, medical bills, payday loans, term deposits, overdraft fees and more.

Wage Garnishment

A wage garnishment is when a governing body places a restriction on an individual’s income where they are required to pay a third party (either the government or another party) directly from wages in order to repay a debt.

  • Takes your existing debt and try to settle with your creditors for a lower amount. If you pay off the settled amount, your debt will be considered paid in full.
  • Negotiates with your creditors on your behalf.
  • Fee based on a percentage of your total starting debt or a percentage of the debt they save you.
  • Most settlement companies have you create a separate "escrow" account where you will make monthly contributions over a certain amount of time to contribute to your settlement. Once there is a substantial amount of funds to show your creditors, the settlement company will try to negotiate a lower amount of debt.
  • Combines all your debts and creditors into one monthly payment.
  • Allows you to pay one monthly payment to the consolidation company, instead of multiple payments to different creditors.
  • You no longer owe your original creditors; instead you pay one monthly payment to your consolidation company.
  • Consolidation companies can help negotiate lower interest rates on your debts and help lower your total debt payment in the long run. A lower interest rate will lower the amount you owe in the end.
  • Allows you to consolidate all your different debts into one personal loan that can be paid off over time.
  • Can offer borrowers a lower interest rate with a longer payback term (compared to high-interest credit cards or medical bills). This will lower the amount of money required to pay off the loan over time.
  • Personal loan debt consolidation can be an effective way to raise your credit score quickly (within 3-6 months).
  • Borrowers can receive funds from their loan within only a few days.

Poll

  • What is the most important feature when choosing a company to consolidate your debt? (Check all that apply)

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