Bust The Debt Money Block
Debt can eat up your extra money. If you are in debt and receive an increase in income the responsibility to pay off the debt combined with garnishments can result in loss of the additional income. God did not mean for debt to be such a large factor in our lives. Technically, this is how God meant for debt to work:
Deuteronomy 15: 1-2
1″At the end of every seven years, you shall grant a remission of debts. 2″This is the manner of remission: every creditor shall release what he has loaned to his neighbor; he shall not exact it of his neighbor and his because the LORD’S remission has been proclaimed.…
Today, debt is not canceled every 7 years. In fact, we are taken to court for any unpaid debts, assets are seized, and certain debts people have lost their lives.
People were allowed to work to pay off debts. “The rich rule over the poor, and the borrower is slave to the lender.” Proverbs 22:7 NIV
What can we do:
Manage debt responsibly. Your credit score is not the most important thing in the world. In fact, it is a game…the more debt you have and pay off the better your score will reflect. Credit scores are also used as a status symbol. Credit scores do not reflect who you are or how important you are. Place your confidence in God instead of scores.
People are denied credit for not having enough credit history. The credit history shows that you have enough money to pay off the debt. You are rewarded more credit when you show you can manage the credit you have. Technically, money is giving to those with money. Debt should not be carried forward for so many years.
Take the following steps to control debt:
Taxes and Debt
Canceled debt over $600.00 is considered taxable income by the IRS. If your goal is to accept debt reduction this is income. The tax amount could range from 20-35% depending on your tax bracket. The lender will send a 1099-C for canceled debt to be reported with taxes. The borrower and the IRS will receive copies of the 1099-C, therefore, you can not avoid paying taxes on this amount.
Foreclosed homes could also incur a tax balance. Unfortunately, the amount forgiven could be taxable however this is an exception to this rule that will allow the borrow to ask for an exemption up to a certain dollar amount for the home. By completing the exception for you can avoid taxes on the foreclosed home.
Read more here: https://www.irs.gov/uac/what-if-my-debt-is-forgiven