consolidate debt collections

You hit a bump in the financial road and some of your debt has gone into collections. And the collections agencies won’t stop calling. And calling. And calling.

It’s enough to make you crazy. Are there any solutions other than just paying what you owe as soon as you can?

Turns out, there might be a few options for you to consolidate your debt before paying it off.

Ian Atkins, an analyst and staff writer for Fit Small Business, who has more than nine years’ experience working in personal and small-business finance, says the biggest benefit of debt consolidation is simplifying your debt management.

“You will now have a single payment to make each month and a single balance to keep track of,” Atkins says. “It is much easier to monitor your progress on paying down debt if there’s only one balance to monitor. Think of it this way, a weight-loss program would be much harder to monitor if you didn’t have a scale that gave you an overall weight, but instead made you weigh every body part, one by one.”

Christian Zimmerman, CEO and founder of Qoins, an app that helps you pay off debt with your spare change, says you can consolidate your debt, even after it’s gone to collections, in three ways: Credit counseling, debt settlement or a debt consolidation loan.

Let’s take a look at these three options:

Credit counseling

In this scenario, you repay all of your debt through a debt management plan with payments agreed upon by you and your counselor. Credit counseling is most often done by credit counseling agencies. You sign a contract granting an agency permission to act on your behalf to negotiate with creditors to resolve your debt. Some of the agencies are nonprofits that charge non-fee rates, while others can be for-profit and include high fees.

Companies that offer credit counseling will sometimes offer consolidation programs. Atkins explains that while these companies do not actually consolidate the debt into one loan or refinance the debt to a lower rate, they may offer to manage your debt payments for you.

“Instead of paying all your creditors individually on your own, you’ll develop a plan to pay off creditors with the debt relief organization,” Atkins says. “That plan will often include a single payment you must make to them, which they will then redistribute to your creditors to achieve the goal of eliminating your debt in the most efficient way possible. It’s important to note that you’re paying back 100% of your debt.”

To research the best credit counseling agencies, check out SuperMoney’s comprehensive list

Debt settlement

Zimmerman explains that with debt settlement, you hire a company to come in and negotiate the total amounts owed to each enrolled debt.

“You then stop paying your creditors and instead start making monthly payments to your debt settlement company, usually through a special bank account,” Zimmerman says. “During this time, the debt settlement company will begin negotiating payoff to your enrolled creditors.”

Atkins is wary of debt settlement companies, but if your credit is already broken, you may not have other choices available.

Debt settlement is really only a good option for people who already have credit problems. If you have good credit, there are much better options, such as a debt consolidation loan. But getting a debt consolidation loan is very hard for people with bad credit who don’t have assets. So if you’re at the end of your rope, this might be your best bet.

Debt consolidation loans

If your debt is already in collections, it’s going to be difficult to qualify for any kind of loan that would allow you to consolidate your debt.

Zimmerman says the most common loan you may be able to get in this type of predicament is a cash-out refinance type of loan that works by refinancing your home loan and pulling equity out from your house.

However, while this may be a good short-term solution, it could put your house at risk or underwater, meaning you will now owe more than the house is worth. This is an important factor to consider when deciding whether to refinance your home to pay off debt.

Keeping all of this advice in mind, if your debt is already in collections and you’re having trouble making payments, credit counseling is most likely the best solution to your problem. Or, if you have a lot of equity in your home, you might consider a home equity loan to pay off debt as well.

Just make sure you do your research. Start with SuperMoney’s list of credit counseling companies that may be able to help.

IRS Tax Relief Programs

It’s said that you have to spend money to make money, and that especially rings true for landlords. Between travel costs, repairs and maintenance, insurance, etc., you have more than your fair share of expenses as a rental property owner. Thankfully, tax deductions help you recover some of that lost income.

But how do you know which expenses the IRS considers to be tax deductible? Consider this article your all-in-one resource for rental property tax deductions.

What expenses can you deduct on your taxes?

1. Taxes

Yes, you read that right. You can deduct your taxes on your taxes. It makes sense that you can deduct the real estate taxes on your rental property. But did you know that you can deduct state, county and local sales taxes, too?

2. Travel

All of those trips to and from your rental property add up. Even if you live close to your rental property, it could still be a good idea to deduct the car mileage you’ve accumulated when collecting rent and inspecting and maintaining the property. For 2017, the IRS has set the standard mileage deduction at 53.5 cents per mile.

However, let’s say that you’re a part of the 50% of landlords that live far away from their properties. You’ll be able to deduct flights, car mileage, hotel costs and whatever expenses you’ve accumulated on your way to and  from checking in on your rental property.

The exception? If the purpose of your visit is to renovate your property. That’s under capital improvements, which we’ll get to in a minute.

3. Depreciation

Your largest expense as a rental property owner will be the actual cost of the rental property. Fortunately, you can deduct the cost of your property over time, which his what “depreciation” means.

Keep in mind that your property has to meet four requirements to be eligible for depreciation:

  1. You are the owner of the property.
  2. The property produces income.
  3. The property is assumed to last more than one year.
  4. It’s possible for the property to lose its value (a.k.a. its determinable useful life).

You can learn more about the different types of depreciation here.

4. Repairs

A major repair, like replacing the roof or windows, is considered a capital improvement. You can deduct these expenses through depreciation.

5. Maintenance

Maintenance, such as painting, cleaning services, lawn services, etc., differs from capital improvements because they are minor updates. They can be deducted in full.

6. Insurance

If you have employees, you can deduct their worker’s compensation and health insurance. Even if you’re just a one-person operation, you can still deduct almost any type of insurance you use to cover your rental property, such as fire, theft, flood and more.

7. Utilities

You can deduct your tenants’ utilities come tax season if you pay for them. All utility bills are eligible, such as water, sewer, electricity, gas, etc… You name it.
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8. Dues

Chances are that if your rental property is a condo, then you most likely have to pay homeowners association dues. The great news is that you can deduct that expense from your taxes as well.

9. Legal and professional fees

Any legal and professional fees associated with your rental property are fair game for a tax deduction. Perhaps you used a tax accountant or consulted a lawyer for an eviction. Whatever the case may be, you’re able to deduct those fees.

10. Advertising

You even get to recuperate your marketing costs. For example, if you paid for a print ad, Facebook ad, radio ad or some other form of advertising, you can deduct the cost on your tax return.

11. Business expenses

You might have just one rental property, but your rental property is still considered to be a business. That means that office space, office supplies, and additional operating expenses are all deductible.

12. Loan Interest

Types of interest you can deduct:

  • Mortgage interest
  • Personal loans
  • Credit cards

However, these loans must be used to either buy the property or for purchases related to the rental.

13. Rental Losses

While owning a rental property is a stable source of income, slumps do happen. However, you don’t need to despair. The government has your back where this is concerned, because you can deduct rental losses on your taxes.

The amount you can deduct depends on whether you’re a professional landlord or non-professional landlord, which really just boils down to how much of your time you spend on your rental property.

[Make it look like a dictionary definition] Professional landlord: You spend a minimum of 62.5 hours per month every year in your rental business, and over half of your time is dedicated to your rental property or properties.

[Table]Table title: How much rental loss can you deduct? Professionals: All of your rental losses. Non-professionals: Up to $25,000 of your rental losses against your overall income.

There’s good news for you non-professionals, too. Any rental losses past the $25,000 cap can be deducted in the following year.

14. Management and broker fees

Some landlords find it more efficient to use a broker to help place tenants and/or a property management company to handle the day-to-day tasks associated with owning a rental property. You can deduct these fees (which is normally a percentage of the annual rent) on your taxes as well.

Keeping track of your expenses

Whether you use a tax professional or not, you can’t take advantage of the tax deductions if you don’t have proof of your expenses. What you keep track of depends on whether or not you have formed your own business entity.

If you haven’t done so and don’t have any employees, then you all you need is 1) a record of your rental income and expenses and 2) supporting documents for your income and expenses.

You can use excel and Quickbooks to keep your records. It might be a good idea to get a receipt scanner or just take pictures of receipts with your phone. That way, you’ll constantly be logging your receipts instead of taking hours to log them during tax season.

Looking to buy a second rental property or just getting into the industry? Learn how you can finance your next rental property now.