It's the most wonderful time of the year.

 

The Christmas holiday season is usually the biggest time of the year for consumer purchases highlighting a year full of scrimping. With consumerism on the rise, it is not surprising that credit card debts pile up along as well. This fact was recently reinforced by a report from a top credit bureau in the country.

 

According to credit bureau Trans Union, credit card debt and delinquency both increased in the final quarter of 2012. Based on their quarterly analyses, the average credit card debt rose along with the delinquency rate in the country. The study analyzed quarter-by-quarter data and trends in consumer activities of credit-active Americans.

 

The report found that last year’s fourth quarter total showed an increase in average credit card debt per borrower rose by 2.5 percent. Actual average figure shows that it went up to $5,122 in the fourth quarter from $4, 966 in the third quarter while delinquency rate also rocketed from 0.75 percent in the third quarter to 0.85 percent in the fourth quarter.

 

Experts still believe that the rise in debt and delinquencies is a natural response during that time of the year and that the increases are still below historic norms. Yet in comparison to 2011’s fourth quarter figures, there was a 0.07 percent jump this year in delinquencies. The good news is that average credit card debts per borrower saw a slight fourth quarter decline from 2011’s $5,204 to this year’s $5,122 which is a 1.6 percent drop.

 

Despite the increase in delinquencies, the drop in average debt is seen as a sign that consumers are managing debts better, and are more diligent about payments. With that being said, the positive sign may see more and more consumers re-enter the credit card market after the difficult last couple of years.

 

With a quirky U.S. economy and a troubled labor market, it is good to see Americans are able to find some financial stability. A time of plenty can usher in more consumer activities as long as debts are paid promptly.

 

About The Author

Those who struggle to pay their debts have several options available to them. Speaking to a bankruptcy and debt solution professional is one. Others can opt to settle debts on their own.

If a debtor opts to do the latter, they may find that it can get complicated especially for those lacking the negotiation skills needed for such tasks. For those who can, however, talking to creditors to settle or lower credit card debts can be a rewarding experience.

Many creditors are willing to negotiate to settle debts if they know that the customer will not be able to pay in full. With the economic crisis as it is, many took advantage of debt forgiveness opportunities last year. What many doesn’t know is that settling debts and any debts forgiven are considered by the Internal Revenue Service as taxable income and will be taxed come tax season.

The cutoff amount is set at $600. This means that creditors that agreed to reduce the outstanding debt by an amount lower than the cutoff is not obligated to pay any taxes while a higher amount than the cutoff is taxed automatically. Failure to recognize this and not declaring it can put someone at risk of being audited or hit with penalties and interests.

Debtors assume that pardoned debts are not considered as income since no actual money changed hands during the settlement. Many creditors and debt settlement companies too are guilty of not disclosing this information after the debt has been settled.

No laws are in place that obligates creditors to provide the information. Debtors just find out about it once the 1099-C from arrive in the mail or if the IRS calls them for not paying taxes on the tax liability reported by the creditor.

A 1099-C form is a complicated debt forgiveness form that requires all information is correct and accurate. Those intrepid enough to file their own will find that filing it and paying the taxes is better than having to endure thousands of dollars of interest accruing debts. 

Keywords: pardoned debts, forgiven debts, bankruptcy and debt solution, debt forgiveness

About The Author

Victor Dela Casa is a Filipino-Canadian who spent over a decade working as a business professional in Canada. Worked in IT, finance, marketing, international trade, public service, project management and the maritime industry. Earned degree in Economics from the University of the Philippines and Business Administration Honours from Eastern College. Currently based in the Philippines and working as a professional writer for a multi-national business processes firm.