Bankruptcy – Is It The Right Choice For You?

Bankruptcy is a very scary term to most people. Many who are considering filing for it are already in a highly stressful situation.

Bankruptcy is a tool that exists in order to give people a second chance when there doesn’t appear to be any viable alternatives. Just be certain it is the right tool for your situation.

Consider these points:

1. There are two types of bankruptcy.

* Chapter 7. This eliminates essentially all of your debts (excluding student loans). The process is very straightforward, quick, and simple in most cases. There are certain requirements that must be met. Contact an attorney or do some research online.

* Chapter 13. This is like a bankruptcy payment plan. If you don’t qualify for Chapter 7, Chapter 13 is the alternative. You would make a single payment to a trustee, and the money would be dispersed to your creditors. This usually lasts from 3 to 5 years.

2. Consider an alternative. Sometimes bankruptcy is an effective choice, but sometimes it is not. Consider the possibility of cutting back on your expenses or getting a part-time job.

* Frequently, if you let your creditors know that you’re considering bankruptcy, they will accept a reduced amount as payment in full. After all, getting something is better than nothing. You might be able to settle your debt for as little as 20% of the real balance.

3. Understand which debts won’t be discharged. The two big debts that are not covered with bankruptcy are student loans and child support delinquency. A federal judge can choose to discharge your student loans, but it’s highly unlikely.

4. What will happen to your house? This varies dramatically from state to state. Some states allow you to keep up to $1 million of equity in your home. Other states only allow $10,000. Find out before you file.

* You might be forced to sell your house if you file Chapter 7. Chapter 13 always allows the debtor to keep the home.

5. What about your other property? It is possible you might be forced to sell some of your assets, including your car (depending on equity and the state you live in). Again, find out before you file the paperwork.

6. Check on your pension, 401(k), and IRA. In most states, these items are free from bankruptcy proceedings. Do your homework!

7. Consider your co-signers. If you file Chapter 7, any co-signers you have will get stuck with your debt. If you file Chapter 13, co-signers are in the clear.

8. How will it affect your personal life? Other people will probably find out about your bankruptcy.

* You’ll have to disclose everything to the court and most records are public.
* In addition, bankruptcy notices are frequently printed in the local paper by law.

Bankruptcy provides a viable way to get a new start if you’re in way over your head with debt. However, it might not be the best choice for you if you can avoid it with other options. With bankruptcy, there is a major blemish on your credit report for at least 7 years. But it is not the death of your credit.

Once all your debts have been eliminated and you’ve gone through a waiting period, you might be surprised to find that you will actually have pretty decent credit. In fact, you will probably receive many credit cards offers.

After bankruptcy, companies can feel more comfortable that you’ll pay back your debts for 2 reasons:

1. You probably don’t owe any more money. You’ll be much more capable of paying back any new debt if you have little to no existing debt.

2. You can’t file bankruptcy again for several years. Bankruptcy won’t be an option for quite a while. This can make creditors more comfortable with giving you credit.

Consider whether or not bankruptcy makes sense for your situation. As with any legal issues, an attorney can be invaluable while looking for solutions to your financial troubles.

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5 Dirty Tricks Credit Card Companies Like to Play

While your credit card company might like to pretend they have your best interests at heart, it turns out that’s not always the case. Credit card companies, like most other businesses, have ‘loopholes’ in place to drain every cent they can from you.

Being aware of these tactics is the best defense. Otherwise, you’ll be paying astronomical interest rates and navigating through a minefield of penalties that are only mentioned in the very fine print of your credit card agreement.

Explore the following ways to monitor your interest rate and avoid those penalties:

1. The grace periods are shrinking or don’t exist at all. Back in the good old days, you had 30 days to pay your balance without suffering the financial burden of paying any interest. Most cards now have a grace period of either 20 or 25 days.

* Some credit cards have no grace period. This means that the interest starts accruing the moment you make your purchase and continues increasing until you pay off the balance.

* If you want to use your card and not pay any interest, find out when your company starts charging interest. The longer the grace period, the better.

2. Fixed interest rates aren’t really fixed. It would seem that a fixed interest rate card would actually be ‘fixed,’ but it’s not. Credit card companies can actually change rates whenever they please.

* To change your rate, all that’s required is a 15-day notice to you as the cardholder.

* Your credit card company is hoping you don’t pay attention to those pesky notices they send in the mail from time to time. That’s how they try to deceive you.

* Be certain you’re actually reading the mail from your credit card companies.

3. One late payment can result in 2 penalties. You might be all too familiar with the Late Payment Fee, which can be as high as $35. There’s also another possible fee that can be incurred: The Penalty Rate. This penalty can be charged if a payment is made 60+ days late.

* The penalty rate is actually a new interest rate that’s imposed on your account. The rate can be as high as 29.99%, and that’s exactly what most credit card companies charge.

* The law requires that the penalty rate be removed after six consecutive on time payments. The Card Act of 2009 has all the details.

4. That same penalty rate can be placed on all your credit cards. That 60-day late payment can result in all your credit cards having the penalty rate. This is true even if you’ve never made a late payment to those other cards.

* One mistake can cost you a lot of money. Having all your cards bumped up to 29.99% interest rate is significant if you carry balances on your credit cards.

* Make your payments on time. It saves you money and preserves your credit score.

5. Balance transfers can be expensive. Maybe you’ve seen those balance transfer checks credit card companies periodically send out. Depending on your situation, they can be great. But be careful!

* These checks seem like a convenient way to consolidate everything into one account. But many of those checks have a 3 to 5 percent fee attached to them.

* These fees can often cancel out any savings you would have gotten by transferring your balance to a card with a lower interest rate. Do the math before you write one of those ‘checks.’

Be aware of these dirty tricks so that you can avoid them. Avoid making late payments and always read the fine print. Remember the credit card companies are trying to separate you from your money. Don’t make it easy for them! If you always pay your balance in full and read the fine print, you’ll be in great shape with your credit.

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Top 10 Money Tips for New Graduates

Many people who graduated years ago probably wish they could go back and do a few things over. Most financial challenges can be avoided by doing things in a careful way. Adopting healthy finance habits can make your future a lot easier and more enjoyable.

On the other hand, unhealthy financial habits can create challenges that take years of work to fully recover. So, get your adulthood started on a positive financial path from the beginning.

Consider incorporating these tips into your financial life as an adult:

1. Read a basic book on personal finance. Good personal finance habits aren’t complicated, but they’re very important. They’re also most effective when started early. Get a good book on this topic and read all about it. Then actually follow the advice.

2. Create a simple budget. Consider your salary and then put together a budget that makes sense for your income and expenses. Remember to set aside some money for savings and investing each month.

3. Avoid debt. Poor spending habits can cause challenging situations quickly. Avoid saddling yourself with debt. A possible exception is taking out a loan to buy a home. Debt is a dream killer because it takes years to resolve.

4. Reduce your current debt. Few things feel better than being debt-free. Your debt is a barrier to fully enjoying your future. Set up a plan to get out of debt. You’ll be glad you did!

5. Create an emergency fund. Start with the goal of setting aside three months of living expenses. If you should ever require it, you’ll be prepared and grateful to have it.

6. Begin investing as soon as possible. The greatest financial leverage young adults have is time. Even small investments can grow into incredible sums given enough time. Educate yourself about stocks and bonds and get started today.

7. Take full advantage of tax-deferred retirement accounts. It’s hard to find a better deal than a 401(k) available through your employer. Between the matching, tax deductions and tax-deferred growth, you won’t find a better investing deal around. Remember to investigate the different IRA offerings, too.

8. Leave your 401(k) alone. Many young adults come up with a reason to dip into their retirement accounts, under the guise of having enough time to make up for it later. This is a huge mistake. You’re better off doing without than having to raid your retirement funds.

9. Secure health insurance. No country has higher medical costs than the US. Because of this, many bankruptcies are due to medical expenses. Illnesses and accidents happen, so be prepared. Everyone requires health insurance to mitigate this substantial risk.

10. Spend your money on worthwhile experiences. You can’t just save like a miser. Life is short, so get out and enjoy it. It’s okay to spend some money on enjoyable experiences without being afraid. This is a big part of the reason you earn money in the first place.

Avoid the many pitfalls of developing poor personal finance habits. Mistakes made at this point in your life are recoverable, but the entire experience can still be extremely challenging.

Good habits ensure good outcomes. Your financial future can be great, if you’re willing to put a smart plan into action right now. There’s no reason to repeat the mistakes of others.

Implement these 10 tips and you’ll find your financial life will have a minimal amount of drama and challenges. Avoiding mistakes is a huge part of being successful.

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The Advantages and Disadvantages of Online Banking

If you believe all the reports, online banking is the wave of future and conventional banks will be largely phased-out. The traditional banking institutions have been closing banks left and right. This trend is expected to continue.

Online banking seems to have everything a customer could want. The interest rates on accounts are higher than in regular banks. The fees are lower, and you can still access your money anywhere.

The differences are diminishing all the time. Banks are adding more online banking options in an effort to cut costs and satisfy the demands of customers.

The following comparison will help you understand the differences:

1. The main issue that prevents many people from fully embracing online banking is security. But this concern is somewhat misplaced. A regular bank also stores all of your information in networks that are just as vulnerable to hackers as those of online banks.

* While there is risk, the risk is the similar with both options.

2. Online banks typically offer lower fees. Online banks are especially kind to those with smaller balances. Traditional banks require, on the average, almost $5,000 to be kept in a savings account in order to avoid additional fees. Online banks only require an average of $350. Twice as many online banks offer free checking.

3. Look at the location of ATMs and the associated fees. Traditional banks have their own ATMs, and you’ll be penalized for using other ATM’s. Check out the location of the ATMs near your home and work. Are they convenient for you?

* Online banks often have agreements in place that allow for withdrawals without additional fees at many ATMs. Some online banks will reimburse the fees you’re charged, up to a certain limit.

4. Interest rates are usually better at online banks. Online banks don’t have the expenses of building and operating physical businesses. They aren’t just a little higher – they’re 6 times higher!

5. Customer service is comparable in terms of quality. With online banking, the customer service will all be done over the phone or computer. If you need to talk to a face, then traditional banking is for you.

6. Deposits are different, but easy with both. Banks always make it easy for you to deposit more money. Checks can be mailed to online banks, but eDeposits are also an option with many.

* You can simply take a picture of the front and back of your check and upload that to your account. Done. Most people, however, seem to be more comfortable depositing a check in person.

Over time, most experts agree that traditional banks will continue to close more and more branches. As younger people grow up, the rate at which this occurs will only accelerate. The primary issue is the acceptance of the technology.

The older banking customers tend to be the most resistant to technology. As these people are replaced, online banking will be more acceptable to the population as a whole.

Younger customers are especially interested in online banking, since the account minimums and reduced fees are more congruent with their financial situation. As these customers age, they are unlikely to move their banking to a conventional bank.

The choice is yours. Online banking and traditional banking offer many of the same services and conveniences. Online banking is less expensive and offers better interest rates. Traditional banks have a physical presence and a friendly face. Which is more important to you?

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