The Mortgage Forgiveness Debt Relief Act of 2007 is certainly a big aid to many homeowners in the United States who owe large mortgage debts. It was implemented as a response to the many foreclosures in the previous years. Initially, the act applied to all housing debts incurred from 2007 to 2009. Because of the Emergency Economic Stabilization Act of 2008, the Debt Relief Act was extended up to 2013. Then, it was further extended to January 1, 2014 because of the American Taxpayer Relief Act of 2012. With the Debt Relief Act, the debt that you owe may either be partially or completely forgiven until the act expires. You can get up to 2 million dollar in debt relief. If you are looking for low income housing debt reduction methods, the Debt Relief Act is one of them. Here are the steps on how to benefit from Debt Relief Act:
Check your qualifications. First of all, the Debt Relief Act only applies to housing debts and not any other types of debt. You cannot take advantage of it if your debts involve credit cards, car loans, and the like. Furthermore, only the first homes of the debtors qualify for the Debt Relief Act.
Apply for debt relief. Qualified homeowners will find it pretty easy to apply for debt relief, since it is similar to filing your taxes. You can file your debt using Form 982, also known as the Reduction of Tax Attributes Due to Discharge of Indebtedness form. Once filled out, attach the form to your federal income tax return on the year that the debt was forgiven. Submit it to the Internal Revenue Service. Homeowners who have already filed for debt relief previously can fill out Form 540X, which allows them to change their income tax return in order to qualify for the Debt Relief Act. Remember to write the heading “Mortgage Debt Relief” on the forms to avoid confusion.
Wait for further notice. If your debt is forgiven partially or completely, you should receive Form 1099-C, also known as the Cancellation of Debt form. It comes from your debtor and shows the amount of debt forgiven in Box 2. The amount should be higher than $600. It will also show the fair market value of any foreclosed property in Box 7.
Contact lenders for discrepancies. Once you receive the Form 1099-C, you should examine it for any errors and inform your lenders immediately if you spot any inconsistencies. You should also contact your lenders if you disagree with the amount in Box 2 and want to appeal your case.
There are several methods that you can use for low income housing debt reduction, and one of the best ones is through the Mortgage Forgiveness Debt Relief Act. Knowing how to benefit from Debt Relief Act will help you file for debt forgiveness using the proper forms. This government program is extremely beneficial for people caught in a housing crisis. Just take note that once you enroll in this program, your involvement in this government grant program will appear on your credit report. Because of the Debt Relief Act, you can pay all your housing debt within 7-9 years, compared to the minimum of 20 years without the Debt Relief Act. You can also relieve other debts by checking out different government programs.