Nonprofit Charity Provides Homeowners Free Loan Modifications to Avoid Foreclosure

Debt Management Credit Counseling Corp, a nonprofit charitable organization (“DMCC”), provides free loan modification services to homeowners who are trying to avoid foreclosure. DMCC housing counselors provide homeowners with information on how to keep their homes or otherwise prevent foreclosure when their current mortgage payment has become too much; forbearance agreements, loan modifications and short sales are among some of the options explained. Homeowners who want to avoid foreclosure should contact DMCC for help determining what the best solution is based on their personal situation.

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Thrifty Spending Issue 78

FEATURE ARTICLE:  What Tax Deductions Are Still Available to Me?

Tax reform measures are enacted frequently by Congress, which makes it hard for U.S. taxpayers to know which deductions are currently available to help lower their tax liability. In fact, a former head of the IRS once said that millions of taxpayers overpay their taxes every year because they overlook one of the many key tax deductions that are available to them.

One of the most overlooked deductions is state and local sales taxes.

Taxpayers may be able to take deductions for student-loan interest, out-of-pocket charitable contributions, moving expenses to take a first job, the child care tax credit, new points on home refinancing, health insurance premiums, home mortgage interest, tax-preparation services, and contributions to a traditional IRA.

Of course, some tax deductions disappear as adjusted gross income increases. And some deductions are subject to sunset provisions, which your tax professional can help you navigate.

Another key deduction is unreimbursed medical and dental expenses.

Remember that you may only deduct medical and dental expenses to the extent that they exceed 7.5% of your adjusted gross income (AGI) and were not reimbursed by your insurance company or employer.*

In addition to medical and dental expenses, certain miscellaneous expenses — primarily unreimbursed employee business expenses — can be written off if they exceed 2% of AGI. Some of the expenses that qualify for this deduction are union dues, small tools, uniforms, employment agency fees, home-office expenses, tax preparation fees, safe-deposit box fees, and investment expenses. Your tax advisor will be able to tell you exactly what’s deductible for you.

The end of the year is the time to take one last good look to determine whether you qualify for a tax credit or deduction or whether you’re close to the cutoff point.

If you’re not close, you may opt to postpone incurring some medical or other expenses until the following year, when you may be able to deduct them.

On the other hand, if you’re only a little short of the threshold amount, you may want to incur additional expenses in the current tax year.

With a little preparation and some help from a qualified tax professional, you may be able to lower your income taxes this year. You just have to plan ahead.

* The Patient Protection and Affordable Care Act of 2010 raises the floor on itemized medical expenses to 10% of AGI beginning in 2013. 1–2), December 2010

MONEY SAVING TIP:  Don’t carry excessive debt.

Some debt in our lives may be essential. We may need a mortgage to purchase a home, we may need to use our credit card to make purchases until pay-day, but your aim to save money should be to have as little debt as possible. Credit Card deb is typically the most expensive debt we may carry. You will be able to save money every month if you make it an absolute rule to pay off your outstanding balance every month. If you can have the discipline to do this you will save money by effectively having no debt, and thus no interest charge on your credit card(s).

DID YOU KNOW…about the ‘magic’ of display?

We can learn a lesson in Underhill’s book from a story told by a retailer about a tempting display of T-shirts.

“We buy them in Sri Lanka for $3 each. Then we bring them over here and sew in washing instructions, which are in French and English. Notice we don’t say the shirts are made in France. But you can infer that if you like. Then … we fold them just right on a tasteful tabletop display, and on the wall behind it we hang a huge, gorgeous photograph of a beautiful woman in an exotic locale wearing the shirt.”

Resist the urge: “Write a monthly mall shopping budget and stash cash in an envelope specifically for that purpose. When the envelope is empty, stop spending,” says Ramsey. “A written budget makes you think twice when you are tempted by impulse buys.”

Thrifty Spending Issue 77

FEATURE ARTICLE:  Can Social Security be garnished?

If creditors and debt collectors are hounding you for money, you may wonder: Can Social Security be garnished? The answer is: It depends on who you owe money to.

Banks and other financial creditors can’t touch your Social Security benefits, but when the government is collecting on a debt, those funds are fair game.

The federal government can garnish your benefits for repayment of several types of debts, including federal income taxes, federal student loans, child support and alimony, nontax debt owed to other federal agencies, defaulted federal home loans and certain civil penalties. Supplemental Security Income cannot be garnished under any circumstance.

What you can lose

Among the government creditors who can grab a piece of your Social Security check, the strongest arm belongs to the IRS. Via the Federal Payment Levy Program, Social Security benefits are subject to a 15 percent levy to pay delinquent taxes. Unlike nontax debts to other agencies, for which the first $750 of your monthly benefits are off-limits to garnishment, the IRS can take its 15 percent cut regardless of how little money you’re left with. Lump-sum death benefits and Social Security benefits paid to children are not subject to this levy.

If you owe money on a student loan, it doesn’t matter how long ago you were in school. A 2005 U.S. Supreme Court case (Lockhart v. U.S.) determined there is no statute of limitations on Social Security offsets to repay student loans. The government can shave off up to 15 percent, provided your remaining monthly benefit doesn’t drop lower than $750.

Delinquent child support and alimony cases are processed through the national Court Ordered Garnishment System. In these situations, the maximum reduction to your benefits depends on the state where you live. The garnishment is limited to either the maximum allowed under state law or the maximum under the Consumer Credit Protection Act, or CCPA, whichever is less.

Per the CCPA, you can theoretically lose up to half your benefits if you are supporting a child or spouse in addition to the one involved in the court order; 60 percent if you’re not supporting another child or spouse; and up to 65 percent if the original court-ordered support is more than 12 weeks in arrears.

From the time you receive your first notice of a liability that is subject to garnishment, you generally have about 120 days to respond before the garnishment takes effect, says John Harman, an attorney and licensed taxpayer representative with JK Harris & Company, a tax-resolution firm based in Goose Creek, S.C. Every agency issuing a garnishment is required to provide information about how to appeal the decision.

The IRS will issue three notices before a levy goes into effect. You have 30 days from the date of the final notice to make a pay arrangement before the agency starts docking your monthly benefits. Other agencies have similar procedures, Harman says.

Losing the levy

Once you make an arrangement with the appropriate agency to repay your debt, the Social Security garnishment is released, says Harman. In some cases, you may be able to negotiate a settlement.

“There are rules allowing all the agencies, when someone owes money to them, to make some compromises with the debtor, to set up payment plans and, in true hardship circumstances, provide some other relief,” says Carolyn Carter, deputy director of advocacy with Boston-based National Consumer Law Center.

For tax debt, you may be able to negotiate an agreement to pay less than your full bill if you are truly strapped. But be aware that the IRS has strict eligibility rules for this arrangement, called an Offer in Compromise, and charges a $150 nonrefundable fee to apply.

In the case of a tax debt, your notice of liability may not pinpoint the specific reason you owe the tax, Harman says. Finding the root of the problem may require some investigation on your part, starting with a request for a review of your files.

“There could be a situation where, for example, a homeowner had been foreclosed on in a previous year,” he says. “Most individuals don’t understand that this can be considered income when the mortgage company writes off that liability. So the individual who had their home foreclosed on can actually end up with a tax debt that they’re not aware of.”

While tax law in effect through 2012 protects some homeowners from foreclosure taxes, affected homeowners must file a special IRS form to avoid the tax.

Escaping garnishment

Harman says people need to be proactive to avoid the threat of garnishment.

“They need to be aware of any potential debts that they have and be thorough when they’re sorting through their mail,” he says. “Don’t throw away any notices from any federal agencies, particularly the IRS.”

For student loan debt, Carter says you’ll have a wider range of options if you haven’t already defaulted. The National Consumer Law Center operates a website that offers information and advice for those having trouble repaying student loans. Find more information at

“There are all sorts of programs for them to do what you might call workouts of their student loans — reducing the interest rates, changing the payment schedules,” Carter says. “In some circumstances, deferments are available. If the student is totally and permanently disabled or if the school closed while the student was there, and in some other circumstances, the student can get the loan discharged.”

MONEY SAVING TIP:  Decide where to put that ‘payment.’

If you plan to sock money away for several years until you reach a specific savings goal, your “pay-yourself-first” money could become automatic contributions to a mutual fund or other stock-oriented fund. If you need the money to be more liquid than that, consider an online savings or money market account that gets linked to your current checking account. Many of these online-only accounts are insured by the Federal Deposit Insurance Corp. (FDIC) and pay annual percentage yields between 4 percent and 5 percent or even higher, as opposed to paltry yields of about 0.2 percent to 0.5 percent for traditional savings accounts. To find such an account, go to, find the “Compare rates” section on the home page, select “Checking & Savings,” and then “MMAs/Savings Accounts.” (Just keep choosing MMAs and savings accounts as you click through.)

The important thing is that you commit to a savings plan. Delaying it or depositing your money into your everyday checking account where funds are easily accessible, won’t work.

DID YOU KNOW…that stores keep their clearance area messy on purpose?

“It’s really hard to conquer the clearance area in some stores because it’s actually designed to make you not want to spend time there,” says Kay.

Retailers know shoppers want to easily find the size, price and item neatly displayed. So they purposely create the frustration of the poorly marked and poorly organized clearance area to tempt you toward the beautifully displayed and perfectly organized full-price merchandise.

Resist the urge: “Never shop when you are rushed for time,” says Kay, “because this leads to making rash decisions.” Instead, she advises setting aside time to shop, dig and search for what you truly want, need and can afford from the clearance section.