Home Buying

Apache is functioning normally

Apache is functioning normally

According to the Federal Reserve, consumer debt in the United States in the second quarter of 2021 totaled more than $4.2 billion. So if you’re struggling with debt, you’re definitely not alone. If you’re looking for a way to dig yourself out of debt, a debt consolidation loan could help.

But what is a debt consolidation loan? Find out if it’s the right option for you by learning more about it, including pros and cons. You’ll also find information about other alternatives.

In This Piece

What Is Debt Consolidation?

Debt consolidation occurs when you bring multiple existing debts under a single umbrella. This usually means you use some type of credit or other financial tool to convert multiple debts into a single debt. Debt consolidation loans are one of the most popular ways to consolidate debt.

What Is a Debt Consolidation Loan?

A debt consolidation loan consolidates, or combines, your various debts under a single account.

Pros of Debt Consolidation Loans Cons of Debt Consolidation Loans
Potentially lower interest rates, especially if you now have the credit score to consolidate high-interest loans under better terms

May require good credit to obtain or get a good rate
A single payment, making it easier to manage your finances Might leave paid-off credit card and other revolving accounts open, creating an opportunity to run up even more debt than you started with
Your debt possibly spreading out over a greater amount of time, making each monthly payment more affordable Could potentially temporarily impact your credit score if it involves closing a lot of other accounts

What’s the Difference Between Debt Consolidation and a Personal Loan?

A personal loan is an unsecured loan that you can use for just about anything. In some cases, you could use the funds from a personal loan to consolidate some debts, making it a debt consolidation loan.

However, a loan specifically for the purpose of debt consolidation may be handled a bit differently. For example, in some cases, the lender may not pay the money directly to you. They might pay off your debts directly instead.

Alternatives to Debt Consolidation Loans

Your options depend on your credit, existing assets, and how much debt you want to consolidate. Some alternatives to debt consolidation loans are highlighted below.

1. Refinance Your Mortgage If You Have Equity

If you have equity in your home, you can refinance it or take out a home equity line of credit, or HELOC. These options give you cash you can use to pay down debt.

Pros of Refinancing a Mortgage to Consolidate Debt Cons of Refinancing a Mortgage to Consolidate Debt

Home equity loans and HELOCs tend to have much lower interest rates than personal loans and credit cards

You use your home as collateral for the debt, which means if you don’t pay it, the lender has a claim on your house
You may be able to deduct interest on home loans to reduce tax burdens Variable-rate loans could come with increased interest in the future
The total number of payments you need to manage each month is substantially reduced Credit cards you pay off could be run up again, leaving you with more debt than you started with
You’re less likely to forget to pay a debt related to your home  

Tip: Don’t pocket the money that refinancing frees up every month. Instead, use it to create an emergency fund. Once that’s set up, use the money as prepayment against your home loan or to boost retirement savings.

2. Use a Balance Transfer Card

Apply for a balance transfer card if your credit is in good shape, or call a card provider to ask if they’d be interested in offering you a balance transfer option on an existing card. This lets you transfer higher-interest credit card debt to a card with lower interest rates. Some balance transfer cards offer 0% APR for six to eighteen months on balance transfers for new account holders.

Pros of Balance Transfer Cards for Debt Consolidation Cons of Balance Transfer Cards for Debt Consolidation

Can substantially reduce the cost of credit card debt

Balance transfers usually come with fees of 3% to 5%—still less than your typical interest costs might be on high-interest credit card debt, but something to keep in mind
Makes it easier to pay off credit card debt It can be tempting to use your old credit cards again, running up more debt and ending up with double the debt you started with
Might let you consolidate multiple cards into a single account for easier management If you don’t pay off the debt in the introductory period, you could end up with expensive interest fees

Tip: Keep your old credit card accounts open for extra benefits to your credit score. It helps your credit utilization rates and credit age. But avoid using those accounts unless you have the money to pay them immediately.

3. Borrow from Retirement Savings

If you have retirement savings, you might be able to borrow from it to pay off debt. Remember, though, that you’ll need that money later. Only consider this option if you can pay back the money quickly so you don’t lose time building your retirement funds.

Pros of Borrowing From Retirement Savings for Debt Consolidation Cons of Borrowing From Retirement Savings for Debt Consolidation

Doesn’t require a credit check, so you don’t need a healthy credit file

You might owe taxes and penalties on the money if you withdraw early from your retirement
Interest rates are low, and you’re actually paying it back to your own account You can borrow against some employer-sponsored retirement plans, but debt consolidation might not be an allowed reason
  You could reduce how much money you have in retirement, especially if you can’t pay back the money

Tip: Consider this option as a last resort loan or if you have some money coming in soon, such as from a tax return. If you can pay the money back within a month or two, you don’t have as much to lose.

4. Ask a Friend or Relative for a Loan

If you know someone who has some extra money, it might be worth asking them for a loan at a low interest rate. You can use the money to pay off your debts and make one monthly payment to the person in question.

Pros of Asking Someone for a Loan for Debt Consolidation Cons of Asking Someone for a Loan for Debt Consolidation

No credit check or requirements

If you blow it, you might ruin an important relationship
Your family member or friend can earn some interest The IRS can be a real pain when it comes to family loans, so consult a tax professional
  Loan payments won’t be reported to your credit reports or potentially help your score

Tip: Treat the transaction as you would with a bank or other lender. Put everything in writing, agree to fees or penalties if you miss payments, and strive to make timely payments.

5. Try Debt Counseling

Debt or credit counseling with a reputable organization can help you create a viable personal budget and potentially negotiate with creditors for better terms. Debt counselors may help you understand how to better manage your income and expenses and leverage debt payoff strategies to get out from under your debt.

Pros of Debt Counseling Cons of Debt Counseling

Can provide you with some tools to better manage debt

May not reduce the overall cost of your debt
May help you see solutions that you didn’t see before May rely on you making personal sacrifices in your budget
Helps you pay off debt with your own resources, which can be satisfying If you don’t work with a reputable organization, you might be scammed out of large fees with promises that the company can’t keep

Tip: Don’t work with debt counseling companies that offer 100% guarantees to reduce or wipe out your debt or that charge excessive fees. These are red flags that could point to scams.

6. Enter a Creditor Assistance Program

Many creditors have assistance programs to help account holders who are experiencing financial distress due to sudden loss of income or an emergency. These programs range from mortgage modifications, which might reduce your interest rate or total monthly payment, to skipping a single payment and having it added onto the end of the loan penalty-free.

Pros of Creditor Assistance Program Cons of Creditor Assistance Programs

May not require good credit, especially if you have a solid payment history with the creditor

Aren’t always available
Could offer a fast, convenient solution to short-term cashflow issues You can typically only take advantage of these tools once or once every so often

Tip: Anytime you’re experiencing financial distress or might be late with a payment, don’t ignore the issue. Call your creditor to find out what they might be able to do to help.

7. Bankruptcy

Bankruptcy is a last-resort option that can help you discharge or restructure your debts and make a new start in a few years.

Pros of Bankruptcy Cons of Bankruptcy

If successful, you can have all or many of your debts discharged

Bankruptcy can be a long and stressful process
You may be able to keep certain assets, such as your home or car It can dramatically impact your credit in the short term
Filing for bankruptcy establishes an automatic stay, so creditors can’t continue to attempt to collect or foreclose unless the bankruptcy is dismissed Depending on what type of bankruptcy you file, you may not be able to get credit for a while

Tip: Talk to a bankruptcy attorney about this option before you take action. Most provide free consultations to help you understand if bankruptcy is a good choice for you.

The Bottom Line on Debt Consolidation

If you’re struggling with debt, you’re not alone. And you do have options. Look into a debt consolidation loan or one of the options above to start working on financial stability for the future.

Source: credit.com

Apache is functioning normally

Apache is functioning normally

Falling behind on your debt can be frightening. You may wonder if the creditor will come for your property or sue you. Sometimes, you don’t even realize you owe a debt before a credit collection service comes calling. But you do have rights and options. Get some tips for negotiating with creditors below. 

In This Piece

1. Determine Whether Negotiation Is the Right Move

Settling your debt isn’t always the right move. If you can pay your debt off quickly without settling, it may be better for your credit. On the flip side, the debt will cost you more money.

Consider the big picture of your personal finances to figure out whether you should just pay off your debt fast or negotiate for more time or a lower payment requirement. 

2. Make Sure the Debt Is Yours

While you’re thinking about whether debt negotiation is right for you, take some time to validate the debt. Mistakes happen—and so does fraud. It’s possible you didn’t originate the debt yourself, and if that’s the case, you can dispute it. 

While validating the debt, you should also check that it falls in the statute of limitations. If debt falls outside the statute, collectors can’t continue to collect it and the creditor can’t sue you for the debt.

3. Don’t Negotiate Without Knowing What You Can Afford

If you decide to settle a debt, figure out what you can afford. Sit down and go through your finances with a fine-tooth comb. What do you really need to spend money on every month, and what can you kick to the curb? Go to the negotiating table with a firm figure in mind. Keep in mind that lump-sum settlements generally cost less in total than monthly repayment plans. 

4. Understand Your Rights

Under the terms of the federal Fair Debt Collection Practices Act (FDCPA), creditors and debt collectors aren’t legally allowed to:

You also have a right to information about your debt, such as the name of the original creditor and how much you owe. Knowing your rights helps you protect yourself throughout the negotiation process. 

5. Keep Your Story Straight

Falling behind on debt often happens because of serious life factors, but reps at credit collection services or lenders aren’t counselors. They’re just employees trying to do a job. 

Give a condensed version of why you can’t pay your debt as agreed, and avoid drama. If you’re in a difficult situation, make that clear, and tell your lender what you’re trying to do to get back on track.

Before you talk with your creditor, it might help to write down and rehearse a few go-to sentences. This can make the discussion less emotional, making sure you’re better able to discuss the details and stand up for your rights. 

Whatever you do, tell the truth. It’s much easier to keep the truth straight, and you’ll feel better if you don’t tell tales.

6. Ask Questions

Don’t be afraid to ask questions. You have a right to know where the debt came from, how the total amount owed was calculated and what fees might be included. 

7. Take Notes

Talking about debt can be stressful and overwhelming. Keep a pen and paper handy so you can take written notes whenever you communicate with a debt collector. Make sure you write down the full name of the person you spoke to, the time of the call, how long the call went on and what you spoke about. You should also jot down any of the bad behaviors we mentioned above if they occur to create a written record of potentially illegal collection practices.

8. Read and Save Your Mail

It can be tempting to throw bills in the trash, but don’t do it. Instead, open them, read them and face your debt head-on. If a debt looks familiar, put the bill in a file and think about how you’d like to settle or discharge the amount. If you don’t remember accruing the debt, ask the lender for proof that you owe it.

9. Talk to Creditors, Not Collection Agencies

Try to negotiate with your original creditors before they sell your debts. Taking the bull by the horns at this stage could help you keep a few points on your credit score. Your original creditor may also have programs that can help you get back on track with payments. 

10. Get Any Agreement in Writing

Get any settlement or repayment plan in writing as soon as possible once you conclude negotiations. Don’t pay any money before you see the agreement in black and white. If you pay before receiving confirmation, you might have trouble later on. Some unfortunate consumers end up getting chased twice for the same debt.

11. Stay Friendly

Debt is a nerve-wracking topic. It’s easy to get emotional when talking to creditors and debt collectors, but try to be friendly and stay on topic. Remember—debt collectors can’t come into your home and confront you, and they can’t take the resources you need to live away from you. If they start making such threats, end the conversation and report them instead of getting heated and angry.

12. Put the Past Behind You

Once you settle a debt, prepare to move into the future as positively as possible. Continue making your other payments on time to avoid this issue in the future. And keep an eye on your credit reports to ensure these old debts don’t crop up again via new collections accounts. Save all the records of your debt settlement so you can prove you don’t owe the money if that does happen.

Source: credit.com

Apache is functioning normally

Apache is functioning normally

Article originally published December 13th, 2017. Updated February 16th, 2023.

Buying a home is an extensive process. It includes marshaling your assets, reviewing your credit—and potentially trying to improve it—and shopping for a house that meets your wants and needs. That’s all before you enter the process of applying for a mortgage and considering your offers.

The process can be daunting, but it’s important to take one step at a time to avoid becoming overwhelmed. One area where people become especially concerned is the overall cost of a home loan. Securing a mortgage can be challenging, but how can you get a good interest rate to reduce the long-term cost of your home?

Here are some tips to help you get the best rates for mortgages. Just remember that many of these tips take time, so plan months or even years ahead for your homebuying journey. 

In This Piece

Tips for Getting the Best Interest Rate on Your Mortgage

When you’re looking to secure a mortgage or get the best possible interest, personal finances really matter. Our tips include those related to your credit history, savings and income, along with some advice about educating yourself on mortgage terms and interest types. 

Understand Interest Rate Types: Fixed vs. Adjustable

A fixed-rate mortgage has the same interest rate throughout the loan’s entire life. This makes your rate and monthly payment predictable and consistent. An adjustable-rate mortgage comes with an interest rate that can change—and often one that could increase if interest rates in the market increase. This can make your rate and monthly payment unpredictable.

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Knowing your plans for the future can help you understand which type of interest rate is best for you. If you only plan to hold on to the home for a few years before selling it to upgrade, an adjustable-rate mortgage—or ARM—might work for you. This is especially true if interest rates are currently low, as an ARM loan tends to start with lower rates than fixed-rate mortgages when all other factors are equal.  

Keep Your Credit Healthy

You do typically need decent credit to secure a mortgage, but there are options for those with lackluster credit. While the credit score required to buy a home depends on many factors, the better your score, the better rates you may be able to command. Interest rates are a huge factor in how much your monthly payment is. Better credit typically equals more favorable rates, which equals lower monthly payments.

Make a Bigger Down Payment

The larger your down payment, the lower your overall loan amount is. That can lead to a lower interest rate when you secure a mortgage. That’s because your interest rate is partially based on your home’s loan-to-value, or LTV.

For example, if a home is worth $200,000 and the loan is for $199,000, that would be considered a high LTV and is riskier for a lender. That could lead to a higher interest rate. If the ratio is lower, however, you might be rewarded with a lower interest rate. 

Have Stable Income

If you can prove that your line of work is in high demand with no sign of slowing down, or if you work for a large, profitable company, your lender may take this into account when processing your paperwork. Income stability demonstrates that you’re less likely to miss mortgage payments.

You can also demonstrate income stability by income history. Documents that show a stable income, such as check stubs, W2 forms and tax returns, might all be required by a mortgage lender when evaluating you for a loan. 

Lower Credit Utilization Ratio

Credit utilization refers to how much of your available credit you’re actively using. A high credit utilization rate occurs when you use a large percentage of your available credit. For example, if you have $10,000 total in credit limits across your credit cards and you have a total balance of $5,000, that’s a credit utilization rate of 50%.

The Consumer Financial Protection Bureau notes that keeping your credit utilization at 30% or lower helps improve your credit score, which can lead to better interest rates for mortgages. It can also ensure mortgage lenders don’t see you as using credit in a desperate or risky way, making them more likely to approve you and offer better rates. 

Make Mortgage Point Payments

It’s possible to pay extra directly to your lender to lower your interest rate. For every one percent of your loan amount you’re willing to pay upfront, you may be able to get as much as half a percent off your home loan interest rate. Essentially, you’re just paying a larger amount of interest upfront, and this is known as buying points. 

Have Enough Savings

Most people know they should have enough savings to cover about 6 months’ worth of bills. Proving to your lender that you can still pay your mortgage in the event of a job loss because you have cash on hand can help you score a lower interest rate. 

A Final Word on Getting the Best Interest Rates for Mortgages

Keeping your finances healthy is the best way to protect yourself when applying for loans. Do the work ahead of time to ensure you’re ready to apply for a mortgage. Then, you can start by comparing rates online to secure a mortgage that works for you.

Source: credit.com

Apache is functioning normally

Apache is functioning normally

Do you have bill collectors contacting you about unpaid debt? If so, it’s important to understand your rights. Even if you have debt that’s still unpaid, your creditors only have a certain amount of time to take legal action against you.

So, before you think about talking to a bill collector or agreeing to a new payment arrangement, it’s important to know what the statutes of limitations are in your state. It’s these statutes that can help you determine your next step.

Keep reading to learn more about what statutes of limitations on debt collection are and how they work.

In This Piece

What Is a Statute of Limitations on Collections?

The statute of limitations on collections is the amount of time a creditor or debt collector has to file a lawsuit to collect unpaid debt. These statutes vary by state, type of debt and terms of the contract, if there is one.

Occasionally, creditors and debt collectors may try to file a lawsuit after the statute of limitations has ended. So, it’s your responsibility to provide the courts with proof that it’s past the statute of limitations. So, be sure to save any payments made or communications you had with any creditor or collections agency.

When the clock for the statute of limitations on debt begins varies from state to state. It either starts when you miss your first payment or when you have the last communication with the creditor or debt collector.

Can a Debt Collector Restart the Clock on My Old Debt?

There’s a chance that communication with a debt collector could restart the clock on the statute of limitations. For example, if you agree to any new payment arrangement or make a payment, this act could restart the clock.

Effect of Statute of Limitations on Your Credit Report

If you’re looking for ways to repair your credit, the statute of limitations has no impact. It’s important to understand that the statute of limitations doesn’t affect how long a debt can remain on your credit report. These are two different policies.

In most cases, a debt can remain on your credit report for up to seven years. This is the case even if the statute of limitations has ended. This means that while creditors may no longer be able to take you to court, your debt could still impact your credit score.

What Is the Statute of Limitations on Debt Collections by State?

Statutes of limitations on collections vary by state and by type of credit account. There are four basic types of debt:

  • Written debt. Written debt occurs when there’s a signed contract that details the terms of the loan. This doesn’t have to be a formal contract. It can simply be written on a piece of paper.
  • Oral debt. Oral debt is a verbal agreement made between two people that details the terms of the debt.
  • Promissory notes. Promissory notes are written agreements where you agree to make a set number of payments over a set number of years. While it is also a form of written debt, promissory notes normally include a promise to repay as well as a repayment schedule. This makes them more legally binding than a written debt or IOU. Common types of promissory notes include home mortgages and student loans.
  • Open-ended credit. Open-ended credit includes any type of revolving credit account, such as credit cards.

Below is a look at the statute of limitations on collection by state, broken down by debt type.

State Written Contract Oral Contract Promissory Open-Ended
Alabama 6 6 6 3
Alaska 3 3 3 3
Arizona 6 3 6 6
Arkansas 5 3 5 5
California 4 2 4 4
Colorado 6 6 6 6
Connecticut 6 3 6 6
Delaware 3 3 3 4
Florida 5 4 5 5
Georgia 6 4 6 6
Hawaii 6 6 6 6
Idaho 5 4 5 4
Illinois 10 5 10 5
Indiana 10 5 10 6
Iowa 10 5 10 6
Kansas 5 3 5 3
Kentucky 10 5 15 10
Louisiana 10 10 10 3
Maine 6 6 20 6
Maryland 3 3 6 3
Massachusetts 6 6 6 6
Michigan 6 6 6 6
Minnesota 6 6 6 6
Mississippi 3 3 3 3
Missouri 10 5 10 5
Montana 8 5 8 5
Nebraska 5 4 5 4
Nevada 6 4 3 4
New Hampshire 3 3 6 3
New Jersey 6 6 6 6
New Mexico 6 4 6 4
New York 6 6 6 6
North Carolina 3 3 5 3
North Dakota 6 6 6 6
Ohio 6 6 6 6
Oklahoma 5 3 6 3
Oregon 6 6 6 6
Pennsylvania 4 4 4 4
Rhode Island 10 10 10 10
South Carolina 3 3 3 3
South Dakota 6 6 6 6
Tennessee 6 6 6 6
Texas 4 4 4 4
Utah 6 4 6 4
Vermont 6 6 6 6
Virginia 5 3 6 3
Washington 6 3 6 6
West Virginia 10 5 6 5
Wisconsin 6 6 10 6
Wyoming 10 8 10 8

Source: The Balance

Just because the statute of limitations has ended doesn’t mean you don’t still owe the debt. It only means that creditors and debt collectors can no longer sue you in court to collect the money due. Technically, you still owe the debt. So, debt collectors and creditors can still try to collect this money.

This means you still might receive calls from debt collectors. It’s important to understand that if you make a new payment agreement regarding an old debt, it can restart the statute of limitations for collections clock. At that point, the debt collector could sue you in court no matter how old the debt is.

Get Help Repairing Your Credit

If you’re working to repair your credit, you may want to pay your debt off even if the statute of limitations has ended. For example, if you live in a state that has a 3-year statute of limitations on credit card debt, this debt may still show up on your credit report for up to seven years.

Paying this debt may be the only way to repair your credit before the end of the 7-year period by possibly reducing the impact of this debt by paying it off. If this is the case, the credit card company may work out a deal with you for a lower amount. Sometimes, these companies agree to remove some of the interest accrued to receive some money. This can be a good option for low-income families looking to repair their credit.  

Sign up for Credit.com today and take the first step toward understanding your credit and what factors are impacting your credit health.

Source: credit.com

Apache is functioning normally

Apache is functioning normally

When you’re considering starting home shopping, it’s important to put yourself in the best possible position. To do this, you’ll want to shore up your finances and increase your credit score. Follow these simple steps to get you closer to your homebuying dream.

Improving Credit for Future Homebuyers

1. Check Your Credit Score

Your credit score will be one of the main considerations in your mortgage application, so check yours to see what needs the most work. A credit score is based on a number of factors: payment history, credit usage, types of credit, age of credit, and recent inquiries. Though you can’t impact all of these in a short period of time, you can take steps to improve in some areas.

Make sure you’re paying all of your bills on time, as on-time payments have a huge impact on your score. Don’t apply for new lines of credit, but you can request a credit limit increase to current credit lines to improve your usage percentage. If you see any errors on your credit report, dispute them so that errors can be removed or corrected, and target credit usage when you make your budget.

2. Assess Your Finances

To know what you have to do to buy the home of your dreams, you need to know where you stand. Write down everything you have coming in and going out each month first. Some of these expenses, such as your car and student loan payments, stay the same over time and will come with you to your new home. Others are variable and change from month to month, including how often you eat out and your entertainment expenses, and these expenditures can most likely be shaved down or eliminated entirely with a budget.

Because homebuying comes with many expenses–a down payment, inspection fees, closing costs–your budget should be tighter in the period before you buy than normal. You’ll also want to budget for a home warranty; see if a home warranty is worth the money. When developing your budget, focus on eliminating your high-interest debt and saving for those homebuying expenses.

Lenders will also look at your debt-to-income ratio or DTI which is the amount of money you have coming in each month versus the expenses you have. Though it varies between lenders, many lenders will not give a mortgage to someone whose DTI is higher than 43%.

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3. Understand Homebuying Costs

For nearly every type of mortgage, a down payment is required. A down payment of no less than 20% is suggested to have better home options and lower monthly costs. Conventional loans allow 20%, however, you can also have a  down payment of as little as 3%; for down payments below 20%, PMI (private mortgage insurance) is required. Other types of loans, like an FHA loan, require between a 3.5-10% down payment, depending on your credit score. Make sure you understand how much you’ll be spending on your new home by using a mortgage calculator. 

Other homebuying fees can add up quickly and be more variable. You will likely have a loan origination fee, inspection fee, appraisal fees, and other fees. You may be able to control some of these by choosing your own professionals. However, others will be selected by the seller, real estate office, or mortgage company.

A brokerage commission may be paid to real estate agents on closing. Your home warranty, property insurance and taxes, and any points you wished to pay to lower your mortgage rate as well as current interest rates will all go into your final costs. Account for all of these expenses when deciding how much mortgage you can afford.

Take steps to improve your creditworthiness and your DTI, and know what you’re looking for when you begin shopping for a lender to work with so you get the best rate possible. With the right moves, you’ll be closing on your dream home in no time.

Source: credit.com

Apache is functioning normally

Apache is functioning normally

If you decide to file for bankruptcy, you must next decide which type of bankruptcy is right for you. Most individuals have three options, and understanding Chapter 11 vs. Chapter 13 vs. Chapter 7 is important in making the right decision. 

Bankruptcy can be complex, and even a small mistake in how you file can substantially change the outcome of your case. It’s typically a good idea to consult an experienced bankruptcy lawyer before you file a bankruptcy petition. However, we’ve provided some basic answers below to the question, “What is the difference between Chapter 7, 11, and 13 when it comes to bankruptcy?”

In This Piece

Understand the Types of Bankruptcy

Bankruptcy is a way to reorganize your debts or get your debts dismissed because you’re insolvent. “Insolvent” is simply a financial state where you can’t pay your bills—usually because your debts outpace your income. 

People can end up in this situation for a number of reasons. It may be that you lost your job or had reduced income—job losses due to the COVID-19 pandemic are just one example of when this can happen. In other cases, people have unplanned expenses such as medical bills that can put them over the edge financially. Bankruptcy does have some benefits, such as potentially putting a stop to wage garnishments or foreclosures. 

Regardless of how you ended up in this position, it’s important not to jump immediately to bankruptcy. Consider all of your options and speak with an experienced bankruptcy attorney to understand whether bankruptcy will help you.

How Do You Know Which Bankruptcy Type is Right for You?

This is a complex personal or business finance question. Consider talking to an attorney to understand your financial and legal situation. An experienced attorney can quickly apply means tests and other information to your case to help you understand what your options are.

What Is Chapter 11 Bankruptcy?

According to the United States Courts, individuals and business entities can enter into Chapter 11 bankruptcy. Typically, this type of bankruptcy is a reorganization of a business. Through the bankruptcy, the debtor restructures and then creates and implements a plan to pay back creditors.

The plan must be approved by a Trustee appointed by the court. The Trustee is typically in charge of implementing and overseeing the plan, ensuring that the business has the income and resources to follow through with it. Once the plan is completed and confirmed, any remaining debts under the bankruptcy are discharged.

This is an extremely simple summary of how a Chapter 11 bankruptcy works. In reality, they can take years and involve numerous legal proceedings on behalf of the person or business filing as well as the Trustee and creditors. 

What Is Chapter 7 Bankruptcy?

The main difference when it comes to Chapter 7 vs. Chapter 11 bankruptcy is that Chapter 7 is a liquidation plan. That means there’s no repayment plan associated with a Chapter 7 bankruptcy.

When you file Chapter 7, you typically agree to liquidate your assets to pay off as much of your debt as you can. The remaining debts that are part of your bankruptcy are dismissed. 

Whether or not you can file for this type of bankruptcy is determined by income. If your income is below the median for the state you’re filing in, you can probably choose Chapter 7 bankruptcy. If your income is above the state minimum, you must pass a “means test.” A bankruptcy attorney can quickly apply these tests to help you understand whether you meet eligibility for Chapter 7. 

You don’t have to give up everything you own in a Chapter 7 bankruptcy, though. You may be able to keep exempt assets, which can include certain personal belongings. You may also be able to keep your home, a car, and other items, even if you owe money on them, if you can continue to make timely payments on those debts. 

Again, bankruptcy is a complex process and what you can keep and how your proceeding goes is based on a variety of factors. Consult an experienced bankruptcy attorney to find out more about your individual situation.

What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy may sound similar to Chapter 11 because these both involve repayment plans. But when it comes to Chapter 11 vs. Chapter 13, the biggest difference is that Chapter 13 allows someone with regular income to make an adjustment to how they pay back some debts.

Chapter 13 may be an option for individuals who fail the means test for Chapter 7. Typically, Chapter 13 bankruptcy works for people who have stable income to make some payments on debts but they don’t have enough income to pay all the debts as currently structured.

The individual submits a repayment plan to the court. This plan must be approved by a bankruptcy court Trustee. The Trustee is also typically tasked with making payments under the plan, so the individual pays the Trustee. The Trustee’s office then pays various creditors.

Usually during a Chapter 13 you only pay off part of your debts. Priority and secured debts, such as taxes or auto loans, are paid in full. But unsecured, nonpriority debts, such as medical bills and credit card debt, are only partially paid. If you work through your Chapter 13 repayment plan successfully, the remaining debts are dismissed at the end of the repayment plan. That can take three to five years. 

Should You File for Bankruptcy?

Only you can decide if bankruptcy is the right choice for you. In most cases, you should consider all your other options and ensure there really is no way to feasibly pay your debts as you agreed. Consider the factors below to determine which type of bankruptcy might be right for you. Then, talk to an attorney to find out more about each option.

Should You File for Chapter 7 Bankruptcy?

  • What is your income? Not everyone qualifies for Chapter 7 bankruptcy. You have to pass what’s called a “means” test, and you usually don’t pass it if you make more than the median income of same-size households in your state. 
  • Have you filed for bankruptcy before? If it hasn’t been long enough since the last time, you may not be able to file.
  • What type of debt are you dealing with? Most, but not all, debt can be discharged in a Chapter 7 bankruptcy. If you’re trying to deal with debt that isn’t dischargeable, it may not be worth filing Chapter 7.
  • Do you want to keep your property? Some property may be exempt, such as your home or a car you need, but you may not be able to keep the same property in a Chapter 7 that you could keep in a Chapter 13, for example. Definitely talk to your bankruptcy lawyer about which property you want to keep and whether it’s possible.

Should You File for Chapter 13 Bankruptcy?

You’ll need to ask all the same questions you’d ask when considering Chapter 7 bankruptcy to find out if Chapter 13 is right for you. You also need to consider whether you have enough income to make some repayment toward your debt. In a Chapter 13 bankruptcy, you restructure your debts and pay some of them over 3 to 5 years before the rest are discharged.

You should also ask yourself if you have the discipline to make the monthly payments to the trustee and follow other rules set by the court. You typically can’t apply for most types of credit, including a mortgage, auto loan or significant personal loan, without getting the court’s approval if you’re in the middle of a Chapter 13 bankruptcy, for example.

Should You File for Chapter 11 Bankruptcy?

Do you have your own business and need to include business debts in your bankruptcy? You might want to consider a Chapter 11 over a Chapter 13. Chapter 11 may also be an option for individuals or couples who have too much debt to qualify for a Chapter 13. Otherwise, all the other questions above apply here, too.

The Main Differences Between the Types of Bankruptcy

To better understand the main differences between Chapter 7, 11, and 13 bankruptcy, consider the table below.

Chapter 7 Chapter 13 Chapter 11
Type of bankruptcy Liquidation Reorganization Reorganization
Income requirements Yes — can’t make above the median for same-size households within the state Yes — must have enough income to make the repayment plan viable Yes — must have enough income to make the repayment plan viable
Can individuals file? Yes Yes Yes
Can businesses file? No Only sole proprietors Yes
How long does it take? A few months 3 to 5 years 1.5 to 5 years
Debt limitations n/a Combined secured and unsecured debts must be less than $2,750,000 n/a

Who Can File for Each Type of Bankruptcy?

In addition to income and debt requirements, each type of bankruptcy has limitations on which individuals or entities can file. 

Chapter 7 Chapter 13 Chapter 11
– Individuals
– Married couples		 – Individuals
– Married couples
– Sole proprietors		 – Individuals
– Married couples
– Sole proprietors
– LLCs
– Partnerships
– Corporations

What Happens After You File for Bankruptcy

The first thing that happens when you file for bankruptcy is that the automatic stay goes into place. This is a protection that requires creditors to cease all collection efforts until the bankruptcy process can be completed. It’s a powerful protection. For example, even if you’re in the middle of a home foreclosure, the automatic stay can stop that process so you can work through bankruptcy to keep your home.

Once the petition is filed with the court, hearings are set and all creditors included in the bankruptcy are notified. They do have the option of responding to the bankruptcy if desired. You’ll also need to attend the first hearing in your case to testify, under oath, to the truth of everything documented in your petition.

If you’re filing a Chapter 11 or Chapter 13 bankruptcy, you’ll need to file a repayment plan, get approval for it and follow through on it. Once the bankruptcy process is completed successfully, your remaining debts can be discharged. 

How Does Bankruptcy Impact Your Credit?

Any type of bankruptcy can impact your credit. It’s a negative item that stays on your credit report and drop your credit score for up to 10 years, depending on which type of bankruptcy you file.

But the truth is that by the time most people get to bankruptcy, they’ve already missed numerous payments and may be in collections with one or more accounts. If this is the case, bankruptcy doesn’t usually drive your credit score much lower than it already is. And there’s a chance that you may see your credit score begin to climb again after bankruptcy as you make timely payments on debts and are better able to manage your finances.

Chapter 11, Chapter 7, or Chapter 13—these are all huge financial and legal decisions. Each comes with its own pros and cons, and it’s important to handle a bankruptcy correctly if you do decide this is the way you want to go. So, talk to a lawyer and get the information you need to make the best decision in your case.

  • Chapter 7 is removed 10 years after the date the petition was filed.
  • Chapter 13 is removed 7 years after the date the petition was filed.
  • Chapter 11 is removed 10 years after the date the petition was filed.

Want to keep an eye on your credit report to understand when negative items fall off it as you’re working to rebuild? Consider signing up for ExtraCredit.

Options Other Than Bankruptcy

Before considering bankruptcy, research other options to help manage your debt. You might find other avenues that are less complex and not as impactful to your credit reports. They can include:

  • Debt consolidation that reduces how many bills you deal with each month and may create a monthly payment situation that works better for your budget
  • Debt counseling that brings in professionals who can help you negotiate with your creditors for better terms and manage your money better to make ends meet
  • Selling property so you can pay off debts that are beyond your current budget
  • Increasing your income with a second job or side hustles so you have more money to pay your debts

Ultimately, whether bankruptcy is right for you is a decision you must make yourself. Start with the information above to gain a brief understanding of your options, and reach out to an attorney to help you understand how these details might apply to your case.

The Impact of COVID-19 on Bankruptcies

Bankruptcies are still proceeding in the wake of the coronavirus pandemic. You may find that hearings related to cases are being handled via phone or web conferencing and not in person.

If you’re making payments on a Chapter 11 or Chapter 13 case and have been impacted financially by the pandemic, you should contact your attorney as soon as possible. They can help you understand the best next steps, which might include filing motions in your case to alter your payments temporarily.

The CARES Act also provides some modifications to how certain elements of bankruptcies are handled. It ensures federal stimulus payments aren’t considered disposable income, for example, and provides Chapter 13 debtors a path to seek modified payment plans if their income is impacted. 

Source: credit.com

Apache is functioning normally

Consumers are growing increasingly optimistic about their personal finances, but the opposite is true when it comes to their ability to buy a home or qualify for a mortgage, according to the National Association of Realtor’s latest Housing Opportunities and Market Experience survey.

The survey found that just 68 percent of consumers are positive about their ability to buy a home, compared to 72 percent in the previous quarter. That represents the lowest level in two years, the NAR said.

Just as concerning is that renters in particular are feeling even less optimistic, with just 55 percent saying now is a good time to buy, compared to 60 percent previously. Renters identified barriers to homeownership including saving for a down payment, qualifying for a mortgage, student debt, worries about future income, and low credit scores.

As for current homeowners, older citizens and those who live in more affordable regions such as the South and Midwest, these displayed more optimism.

“The critical shortage of listings in most markets continues to spark a hike in home prices that is not easy for many buyers—especially first-time buyers—to overcome,” said NAR Chief Economist Lawrence Yun. “Adding more fuel to the affordability fire is the fact that mortgage rates have shot up to a four-year high in just a few months. Many house hunters are telling realtors that they are dispirited by the stiff competition for the short number of listings they can afford.”

On the other side of the equation, 74 percent of current homeowners state they believe now is a good time to buy, compared to just 69 percent one year ago.

“There’s no question that a majority of homeowners have amassed considerable equity gains since the downturn,” Yun said. “Home prices have grown a cumulative 48 percent since 2011 and are up 5.9 percent through the first two months of this year. Supply conditions would improve measurably—and ultimately lead to more sales—if a growing number of homeowners finally decide that this spring is the time to list their home for sale.”

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
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Source: realtybiznews.com

Apache is functioning normally

Real estate listings platform Zillow says it’s planning to buy and sell homes in the Las Vegas and Phoenix areas as part of a major change to its business model.

The company is working with Berkshire Hathaway and Coldwell Banker to make offers on suitable homes, before selling these to buyers. Zillow will pay commissions and also “make necessary repairs and updates and list the home as quickly as possible.”

Zillow is calling the new program “Instant Offers”, and says it will help provide agents with an opportunity to acquire new listings by hooking them up with motivated sellers who’re taking direct action to sell. The way it works is that interested homeowners can offer to sell their home to Zillow directly. They simply submit their home for consideration, and after a review Zillow will make what it believes is a fair offer to buy that property.

“Across all testing, Zillow found the vast majority of sellers who requested an Instant Offer ended up selling their home with an agent, making Instant Offers an excellent source of seller leads for Premier Agents and brokerage partners,” the company said in its announcement.

The announcement is a big change for Zillow, which mainly acts as a hub of information on properties for sale. By buying and selling homes itself, Zillow is taking on significant costs and risks, which may help to explain why its share price fell by 7 percent on the news. Clearly, some investors are averse to this increased risk.

Nonetheless, Zillow said it was optimistic that the new model would prove to be successful after extensive testing carried out in the last year.

Zillow CEO Spencer Rascoff later told CNBC that the company was “ready to be an investor in our own marketplace”. He said Zillow has a major advantage as it has unique access to a “huge audience” of sellers and buyers.

The move puts Zillow in direct competition with a site called Opendoor.com, which operates a similar business model, buying properties and readying them for the next buyer.

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
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Source: realtybiznews.com

Apache is functioning normally

The all-in-one real estate platform at openlistings.com represents the next step in the home buying experience. Designed for the tech-savvy consumer, Open Listings lets members complete the home buying process without the aid of a traditional real estate agent. The results? A 50% refund of the standard agent’s commision and a total customer savings of over $8 million dollars. And with the company recently surpassing $1 billion dollars in total sales, member savings average out to approximately $9,000 per user.

The Open Listings story is both fascinating and instructive. It also provides a glimpse into the possible future of the entire real estate market.

A Start-Up No More

Significantly, Open Listings has achieved its impressive numbers in the space of just over three years. Launched in February 2015, Open Listings’ high-tech approach to home buying attracted forward-thinking investors like Reddit co-founder Alexis Ohanian. His substantial investment proved to a harbinger of things to come. Soon, millennials and other tech-savvy customers flocked to the site in droves. This allowed the California-based company to quickly expand into Seattle, Austin, Chicago, and Dallas.

So what is it about this ambitious company that has persuaded so many home buyers to abandon the services of a conventional real estate agent? For starters, the reduced commission has proven to be quite the incentive. Open Listings’ website has also managed to streamline the daunting, complicated process of buying a home. Combine these factors with the digital vector the global economy now travels and you get a company that might soon dominate the entire real estate market.

Innovation Plays a Starring Role

Not surprisingly, innovation has fueled Open Listings meteoric rise. This innovative vision was evident from the beginning– the very concept of an all-in-one home buying platform marks a radical departure from the industry’s standard procedures. Yes, the internet was already glutted with online real estate services and easy-to-use apps when Open Listings got started. But as useful as they once were, these services now seem like glorified classified sections.

A quick rundown of how the site works will further demonstrate the role innovation has played in Open Listings’ rapid ascent. Members can use the site’s next-wave software to navigate the entire home buying process. They can browse homes for sale in their area, schedule on-demand showings, and submit an offer. But the real estate agent hasn’t been completely eliminated from the equation. Open Listings has affiliated agents that can help members with everything from the initial showing to the closing details.

Prior to actually choosing a home, users can utilize Open Listings’ personalized feed. Driven by advanced market analytics, this feed allows members to view homes that match their search criteria effortlessly. These features are available on both the Open Listing website and their IOS or Android app. Most importantly, these services are free of charge. Open Listings only collects its fee after members have closed on their home.

All in all, the Open Listings platform gives members a slick and streamlined home buying experience. Along with the 50% reduction in commission, this is a chief reason that Open Listings might very well completely transform the real estate business.

Ben Shepardson is a Realty Biz News Contributing Writer and has a long track record of success in online marketing and web development. While pursuing a bachelor’s degree in Computer Information Systems, he worked doing enterprise-level SEO and started an online business offering web development services to small business customers.

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Source: realtybiznews.com