Monthly Archives: December 2007

How do you see yourself after filing for bankruptcy?

Many people remain confused about their life after filing for bankruptcy. After you have made this decision and filed for bankruptcy, you can expect a well deserved life from the sleepless night and endless calls and letters from the creditors and the bill collectors. In some cases, people file for bankruptcy because of their reckless spending and adopting an extravagant lifestyle. Sometimes, it can also be caused due to unintentional job loss, divorce, illness or an unexpected injury.Sometimes, people feel uncomfortable of taking this decision because of the potential havoc it can cause on their finance. This negativity has to be mentioned because it can often lead to hurting emotions that can lead to making unsound financial decisions with devastating results.

Bankruptcy is an ideal choice for those people who are having more expenses than their hard earned income. If bankruptcy is not filed at this stage and stop the negative cash flow, life can get affected adversely. Don’t wait to explore other options otherwise, you will only be going deeper into the hole. There is no way of coming out if you already have had your expenses more than your income.During these hard moments of life, don’t borrow money from your near and dear ones as most people consider it to be a favorable option. You will only be in debt not only to your creditors but also to your near ones in the family and friends. Never make this unwise financial decision. People often think to pursue this strategy in an attempt to buy time and hold off on filing for bankruptcy. This might be a noble thought in books, but in real life, the problem will multiply and serves to delay the inevitable.Homeowners who find themselves in this upside down cash flow must take suggestions from a qualified mortgage professional. An experienced loan officer can objectively look at your finances and determine if restructuring your mortgage would not only help, but possibly even alleviate any need for bankruptcy. There are reputed bankruptcy attorneys and credit counselors who can help you in filing for bankruptcy. If you are already speaking with a qualified mortgage specialist, s/he will refer you to good professionals since they have to deal with them regularly in their work. One must discuss with different professionals because an expert can greatly decrease the urgent need of filing for bankruptcy.Always be honest to the expert from whom you are taking counseling. If you hide about your finance, he will not be able to make a better financial decision for you. If you have any change in income, tell it right away so that the decision making doesn’t get affected throughout the process. Bankruptcy is a federal procedure, adjudicated by real judges, and scrutinized by representatives who coordinate with the Department of Justice, the FBI, and the IRS.

  • Consider the following steps to make the bankruptcy process simpler:
  1. Keep all the paperwork organized. This will help after your bankruptcy because you have everything documented and stored in one place. Be sure to keep a note of the date of discharge. Most of the times, people forget to do it.
  2. Stick to a monthly household budget.
  3. Try to save as much as possible in the course of bankruptcy. This saving that you do now will help you in case of emergencies that might arise in the future.
  4. Beware of the junk emails coming to your address. There will be lots of sharks around you to capitalize on your urgent need for credit.
  5. Your credit is very important during this period. Go through the other article and know how to keep your credit in good rating. If you don’t have a car and you really need it, consider buying an inexpensive car. Focus on transportation as opposed to luxury. Try to get a loan for purchasing the car and be regular in your monthly payments. This will have a direct effect on your credit scores moving towards the high.
  6. Always prefer to use a secured credit card. You will have to deposit a certain amount of money into an account to use the credit available on the secured card. This will keep your spending habits in control. Missed payments will result in deductions from the account. If you are using the card nicely, you will be rewarded with an increased credit limit. Be wary of offers of “easy credit”. Most of them turn out as scams. If anyone asks you to call a 900 number and apply for new credit, be careful because you will be charged for that call.

There is certainly a good life after bankruptcy. Use the tips to rebuild your credit history. It will take time but the results will be fruitful. Always be sure to pay all your bills on time. Any late payments or other negative remarks will hurt your credit ratings very quickly as compared to the time taken to rebuild credit. With a little time and a clean credit history, you will be back on your feet better than ever.

Credit Scores – Facts and Fallacies

Fallacy: My scores determines whether I will get credit or not! Fact: There a number of facts that a lender will consider before making a credit decision. This well includes your FICO scores. They look at the amount of your debt and figure out whether you will be a potential risk to their finance after extending new credit. They also go through your employment history and credit history. Based on their perception of this information and the specific underwriting policies, lenders may grant credit to you even if the scores are low, or decline your request for credit even if you have high scores.

Fallacy: A poor score will haunt me forever.Fact: This is not true. Your credit scores depict your financial picture at a particular point of time. It keeps on changing when new information is added to your bank and credit bureau files. Your scores will keep changing after your creditors report your account status to the bureaus. Lenders request a credit score when you have submitted a credit application. They will get the most recent information from the bureaus if you have already been paying regularly to your other creditors.Fallacy: Credit scoring is unfair to minorities.Fact: Scores are based on credit related information only. Gender, race, nationality and marital status do not put any affect on your credit scoring module. Equal Credit Opportunity Act (ECOA) prohibits lenders from taking this information when issuing credit. The policies should be same for minorities or people with little credit history.

Fallacy: Credit scoring infringes on my privacy.

Fact: Any lender will have to evaluate your credit potential on the basis of your credit bureau report, credit application and/or your bank file. They don’t need to go through any other information to decide whether to offer credit or not. Lenders using scoring sometimes ask for less information – fewer questions on the application form, for example.

Fallacy: My score will drop if I apply for new credit.

Fact: If it does, it probably won’t drop much. If you are applying for too many credit cards within a short time, there will be inquiries showing on the credit report. Looking for new credit might equate with higher risk. If you are having inquiries from auto or mortgage lenders, it will have a least affect on your credit scores and will show up as a single inquiry.

What is an Annuity and what are its attractive features?

Annuity is an agreement between one person or organization with another person or organization to make a series of payments. In general terms, it is a contract between you and another organization like a life insurance company, a charity or a trust where you continue to make a series of payments for a specified period of time.

  • Annuities can be classified under different categories:

Nature of the underlying investment – fixed or variable.

Primary purpose – accumulation or pay out. It can be differed or immediate

Qualified or non qualified tax status

Premium payment arrangement. It can be single or flexible premium.

  • The attractive features of annuities are as following:

Tax deferral on investment earning: There are different types of investments that are taxed every year. There are certain investment earnings – capital gains and investment income in annuities that are not taxable until you withdraw money. Unlike the 401(k)s and the IRAs, you can put any amount into an annuity. In the same way, the minimum withdrawal requirements for annuities are more liberal than they are on the IRAs and the 401(k)s

Protection from creditors: The amount invested in Annuities are protected and if you have some creditors under some kind of payment plan, they cannot touch your money invested in annuity according to the state laws and court decisions.

An array of investment options, including “floors”: There are many annuity companies that offer various kinds of investment options. If you invest in a fixed annuity, you will have a specified interest rate credited like a certificate of deposit. If you buy a variable annuity, your money can be invested in stock or bond or mutual funds. Recently, annuity companies have created various types of floors that will limit the extent of investment decline from an increasing reference point. For example, there are some kind of annuities that guarantees a certain amount of value on your investment on its most recent policy anniversary.

Tax free transfers among investment options: There are no tax consequences with annuities if you change how your funds are invested. Many financial advisors recommend rebalancing of funds where you shift your investments periodically to return them to the proportions that you determine represent the risk/return combination most appropriate for your situation.

Lifetime income: Certain annuities can covert an investment into a stream of payments that will last till your death. The money is generated from your investment, investment earnings and a pool of people in your group. It is assumed that not all the people in the group will be able to live as the actuarial tables forecast. This allows the annuity companies to guarantee you a lifetime income.