In this financially turbulent time, many Americans have found themselves facing foreclosure. It’s not an altogether strange story… Being able to make a mortgage payment is getting harder and harder as more people lose their jobs.
It only takes getting behind on one payment, and then before you know it, you can be paying huge amounts of interest. Creditors want to you owe them as much money as possible, which is why they entice you into vehicles, property, or other goods that would normally be beyond your means.
It may have seemed like a miracle that a credit company was willing to loan you the money to buy a great new house, but there was nothing miraculous about it. For them, it’s a win-win proposition. If you pay the money back, then it’s no problem for them. But if you fail to pay on time, they’ll just keep taking and taking until you have nothing left.
That’s why filing for bankruptcy is such an important part of your rights as an American. If you’ve bought a house beyond your means, or if you’ve suffered a bad turn of luck, you may be facing foreclosure. If your house is foreclosed, you may have nowhere else to go, but the credit companies don’t care. That’s not their problem.
If you file for bankruptcy any time before the foreclosure sale date, your property can be protected under bankruptcy law, and in most cases, you can even just keep the house!
It should come as no surprise to learn that singles are less affluent compared to other family structures. According to recent research by the MetLife Mature Market Institute, singles reported the lowest income levels (averaging $32,000), the lowest asset levels ($110,000) and the lowest rates of homeownership (43 percent). A surprisingly low 17 percent said they were on track to reach their retirement savings goals and 20 percent hadn't even started saving. The biggest worries for singles were affording their living expenses and maintaining their standard of living in retirement.
Most of the financial stress originates from relying on one income instead of two. This makes singles more vulnerable than couples who enjoy double earnings. Additionally, singles tend to earn less money and have lower education levels than their married peers, whether they have children or not. The study also reported that singles between the ages of 45 and 80 were less likely to have taken steps to pay off debt than married couples of the same age.
Changing demographics raise economic concerns
The MetLife study comes at a time when the country's demographics have already shifted in favor of single-person households. In fact, the U.S Census Bureau reported that single-earner households had grown to 31 million as of 2010, a 15 percent increase over the previous ten years. Meanwhile, traditional husband-wife households are on the decline, making up less than half of all households in America. If singles continue to be financially insecure, this trend could prove to be troubling for the economy.
Of course there are always individuals that buck the trends and find a way to make single life sound better. Eleanore Wells, a singles expert and author of "The Spinsterlicious Life," said it is far easier for her to save for retirement, because her money is her own and she can spend it how she wants to. Wells isn't the only one who feels this way. Many divorcees say they are better off single than they were as a couple, especially if their partner was less financially responsible.
Are singles more likely to declare bankruptcy?
Single people face more financial stresses than couples, but bankruptcy is usually caused by major economic stresses, such as a lost home, lower wages or unemployment. Any significant financial strain is likely to result in bankruptcy, but it's even harder to dig out of debt when you're facing it alone.
Singles are also less likely to seek the advice of a financial counselor, and less likely to save for retirement. The MetLife study found that couples were far more likely than their single counterparts to pay off debt or have met with a professional to help them map out their finances.
All of this stress on singles ultimately results in a higher rate of Colorado bankruptcy filings for single-headed households. But there is a bright side of bankruptcy; it can give you a fresh start and a clean financial slate. A successful bankruptcy is unrivaled in terms of the freedom it offers. One of the benefits of being single during the bankruptcy process is that you won't have to worry about jointly-held debts, as is often the concern with couples or recently-separated individuals.
A consultation with a Colorado Springs bankruptcy attorney will help you determine if bankruptcy is the right solution for your debt problems. Many people try debt counseling first, or a debt consolidation loan. An attorney specializing in bankruptcy can advise you on the best course of action.
It makes sense that if you are filing for bankruptcy, you aren't in a position to pay a fortune to an attorney to help you do it. Some people turn to a lawyer who will do it for a few hundred dollars, while others try to navigate the process on their own.
But our Colorado Chapter 7 bankruptcy attorneys want you to know the truth: This is one area where you really can not afford NOT to hire an experienced lawyer. Failing to do this is likely to cost you much more in the end.
We work especially hard to keep our rates competitive, as we understand the challenges that our bankruptcy clients are currently facing. But we also want our clients to know that we refuse to cut corners, as many of the $500-a-case bankruptcy attorneys will.
Here's what you risk when you hire a cheap attorney with little to no experience in bankruptcy law:
This is certainly not to say that all low-cost bankruptcy attorneys are bad at what they do, and you also can't necessarily assume that just because an attorney is priced high that he or she is better.
So sure, you might find someone who will do a decent job for a few hundred dollars, particularly if your case is uncomplicated. But you take an enormous risk when you do this because if you end up stuck paying debts that would have otherwise discharged, that few hundred dollars you saved on an attorney will be spent to these creditors in the long-run.
The mistake many people make is assuming they can't afford one because of how much they owe. But what's important to note is that when you file for bankruptcy, you will likely be advised to stop paying all or most of your creditors immediately. These are debts that are going to eventually be discharged anyway, so it's often pointless to continue paying. What this also means is that if you have some form of income, you should be able to afford a qualified attorney.
Contact us today to see how we can help.
One of the most disturbing trends in money management is overuse of debt consolidation loans. Sure, they may be the perfect solution for people who have gotten into unforeseen financial trouble, but debt consolidation loans are too often used to treat symptoms instead of addressing an underlying problem. One of the greatest myths about these loans is that they save money on interest. The only way interest rates get cut is when someone borrows against home equity, but home equity loans can become a crutch as well.
Bankruptcy attorneys have seen many clients come into their office after thinking they had "fixed" their finances through debt consolidation, only to find out later on that the old habits are still there. They just "moved" the debt to a different collector. It's a bad idea to think you can borrow your way out of debt. A true fix will be neither quick nor easy, but it will have a lasting effect.
People who find themselves in debt frequently are likely to avoid addressing its real source, which is overspending and undersaving. Financial coaches rarely recommend a debt consolidation loan for clients because they know it doesn't work.
Statistics about debt consolidation
Some debt consolidation firms estimate that more than 78 percent of the time, after a client consolidates credit card debt, it gradually grows back. The reason for this is the client hasn't developed a game plan to prevent it from happening, such as saving for unexpected events or paying cash all the time.
When a debt consolidation offers lower monthly payments, most people feel like they've "won," but they soon find that the lower payment isn't coming from lower rates; just a longer payment term. Staying in debt longer usually means you pay the lender more money, which explains why so many lenders jumped into the debt consolidation business.
For example, say you've accumulated $30,000 in unsecured debt, including a four year loan for $20,000 at 10% and a two-year loan for $10,000 at 12%. Your monthly payment on the $20,000 loan would be $583 and you would pay $517 on the $10,000 loan, with monthly payments totaling $1,100. A debt consolidation company comes along and tells you they can lower your payment to $640 per month and by negotiating with your creditors lower your interest rate to 9% because all of your loans would be rolled into one. While this may sound tempting, what they don't tell you is now it will take you six years to pay off the loan. Instead of paying the $40,392 you would have owed on the original loans, now you're paying $46,080, even with the lower interest rate of 9%. Not such a great deal after all. But now do you see why these debt consolidation companies are so profitable?
How Can You Really Get Out of Debt?
The solution is not in the interest rate. You will need to change your spending habits by committing to a written game plan and sticking with it. If needed, get a second job and start paying down your debt. Figure out how to live on less than you earn and be frugal! Changing your habits isn't easy, but it will put you on the path to financial freedom and out of bankruptcy court, which is where you want to be.
Will a Debt Consolidation Damage Your Credit Score?
A lot of people think that a debt consolidation will make their credit report look better because it will show a lot of closed, paid-off accounts. But the answer really depends on what you do afterwards. If you get the debts consolidated and then start using your old credit cards again it will hurt your credit score. The best thing to do after a debt consolidation is to cut up your cards and stop filling out credit card applications. Make your loan payments on time every month and check your credit score regularly for any changes.
Consolidating credit cards with high balances using an installment loan — a loan with fixed monthly payments — may actually benefit your credit rating, especially if you use the loan to pay off credit cards that are near their limits. At the same time, any new loan can cause a short-term dip to your credit scores — so don't be surprised if that happens.
Transferring a high-rate credit card balance to a card at a lower rate can be another way to consolidate. If you decide to go this route it's important to be disciplined in your approach. Otherwise, you may fall into traps such as getting stuck with a balance at a high interest rate after the introductory period ends. If you use a substantial portion of the available credit on the card to consolidate balances from other cards with lower balance-to-available-credit ratios, your credit scores may drop.
Remember, moving around debt is not the goal here. The goal is to pay off those balances to free up cash flow as well as to help build strong credit. A consolidation loan, used correctly, can help you get there just a little faster.
Contact Us today for more information and to receive a free consultation.
Whether you're struggling to make mortgage payments or seriously behind, foreclosure is a scary proposition. Not only would this be devastating to your lifestyle, but you may be concerned about its impact on your credit. But isn't every major financial problem going to damage your credit? When it comes to your FICO score, is it much different to go through foreclosure or bankruptcy, complete a short-sale, or request a loan modification from your bank?
While it may seem to be a minor, there is actually a significant difference between these options. Before you decide what to do, find out which activity will have the greatest impact on your credit score.
Your credit score
Every person is assigned a number by a credit scoring company that predicts your likelihood of default on payment obligations. This number is called a FICO score. Each credit reporting agency uses a different set of factors and calculations to get to this score, but most of the information they use is contained within your credit report. For this reason, it is very important to look at your credit report often, just in case there are any errors in reporting.
A FICO is required in 90 percent of all mortgage applications, so it is a number that could impact both your buying power and interest rate.
What influences your FICO score?
Payment history accounts for 35% of this score, which means if you pay your bills late your number will be lower. The more recent the problem, the more it will affect your score.
Outstanding debt accounts for 30 percent. If the amount you owe to a creditor is close to the credit limit, this will negatively impact your credit score. Also, carrying a balance on several accounts will reduce your score because it will seem like you are overextended.
Length of credit history accounts for 15 percent, which means the longer you've had an account open, the better it is for your score. However, new credit (10 percent) shows you've been applying for many new credit limits, which could negatively impact your score.
Finally, the type of credit you have will account for 10 percent. FICO looks for a healthy mix, including both revolving and installment loans, but this will only be important when there is little information available to determine your score.
What happens when you file for bankruptcy?
A bankruptcy filing will show up on your credit report for 10 years, which is three years longer than most other negative information, such as short-sales, foreclosures and loan modifications.
The impact of foreclosure on your credit score
If your credit score is high to begin with, any kind of financial distress will cause a deeper dive than if your score was already low. In fact, borrowers with higher FICO scores could see a drop of 100 or more points. Additionally, it will take longer to get back to an original score if that score is high, but the number of years it takes to rebuild will largely depend on your future payment history and debt load.
If you have excellent payment behavior and your available credit increases, your score will improve more quickly than if you continue to make some late payments and are remain overextended.
Foreclosure, bankruptcy and short-sale often impact borrowers' scores so dramatically because borrowers only resort to these measures when they are seriously delinquent.
What about loan modifications and forbearances?
If your lender reports that you are "paying under a partial agreement," this could have a negative impact on your FICO score, but a lot depends on how your loan modification is reported. Either way, if you are no longer paying your mortgage as originally agreed, it will have some impact on your score.
Bankruptcy is worse for your credit score
Statistics from FICO indicate that bankruptcy is slightly worse for your credit score than foreclosure, forbearance, short-sale, or a loan modification. When comparing foreclosure to short-sale, borrowers who faced foreclosure took longer to rebuild credit than those who completed a short-sale. This can be attributed to the fact that foreclosure is normally triggered by such life events as a job loss, divorce or medical problem, conditions which will likely continue long after the foreclosure.
Keep in mind, however, that these statistics reflect the average situation, and everyone's financial situation is different. ¬¬
Photo Courtesy of Stuart Miles / FreeDigitalPhotos.net
If you are facing foreclosure, it won't be long before your friends and family start offering advice. You may hear about some proven strategies to keep the mortgage company at bay, and other actions that may help you avoid foreclosure. But first it is important to understand foreclosure.
What is foreclosure?
A bank foreclosure is a legal process through which a mortgage lender can take possession of your home when you are not making the monthly mortgage payments. While it is different in every state, it usually follows that when you miss a few payments on the mortgage, the lender will send a default letter. This letter usually urges the borrower to make payments to catch up or to make some alternative arrangement with the bank. However, if the situation is not fixed within a few months of this letter, the bank will begin the foreclosure process.
What is the foreclosure process like?
After a loan has been in default for a month or two, the bank will send Sheriff's Sale Notice. Usually, this sale is scheduled to take place within four weeks of the date of the letter. Sheriff's sales are auctions where people can bid on the house; however the lender is usually the winner of the auction. In certain situations, the lender can attempt to collect any balance of the loan above the price paid at the sheriff's sale. This debt is called a "deficiency" but it usually a dischargeable debt in bankruptcy.
On the day of the sale, the lender assumes ownership of the property and the "redemption period" starts. This period of time is designed to protect the borrower's from abuse by the lender and it usually lasts for six months. During this time, the borrower can remain in the home, but doesn't have to pay the mortgage or property taxes. The borrower may also buy back the home at the price paid at the auction, but this might be impossible since lenders won't give loans to people right after a foreclosure. At the end of the redemption period, the borrowers can be evicted from the home.
How can bankruptcy help?
Filing for bankruptcy during a foreclosure can help in a couple of ways, but it must have been filed before the sheriff's sale. For one, a Chapter 13 bankruptcy can help you catch up on payments if you fell behind on your mortgage. Secondly, Chapter 7 allows you to stay in the home longer while stopping the lender from collecting a deficiency after taking the home.
Chapter 13 and foreclosure
If you fall behind on your house payments but you still have a large enough income to pay the mortgage, then Chapter 13 might be the ideal solution. This is particularly true when you have some equity in the home and want to hold on to it. A Chapter 13 bankruptcy allows you to pay back the amount your fell behind over the period of three to five years, while continuing to make regular mortgage payments. Once the arrears are paid, the mortgage will no longer be in default.
Chapter 7 and foreclosure
If you fell "underwater" on your mortgage because the balance is higher than the value of your home, or you can no longer afford to make monthly mortgage payments, then Chapter 7 may be just the fix. Chapter 7 bankruptcy legally protects you from any actions taken to collect a debt, including the sheriff's sale on a foreclosed home. While the lender can still ask the court to hold a sheriff's sale, the protections of Chapter 7 can last up to three months. In the case of a Chapter 7 bankruptcy, you can gain an additional 1 to 3 months in the home without paying a mortgage.
Perhaps more importantly, a Chapter 7 bankruptcy discharges any deficiency debt that may result from the house selling at auction for less than the balance of the mortgage. In cases where the deficiency judgment is quite large; which can occur when the house is remortgaged or underwater, a Chapter 7 filing can be quite helpful.
That's it, you've had it! After struggling for months, or even years, to pay your debts, you are ready to consider filing for bankruptcy. The time has come to find a bankruptcy lawyer but you have no idea what to look for, or which questions to ask. It's not uncommon to see a bankruptcy attorney advertise on television. Some even advertise on billboards, but you can't be sure. It might be awkward to ask friends and family for a recommendation, so most people opt for an online search.
Believe it or not, a lot can be learned just by reading through an attorney's web site, but you shouldn't stop there. Filing for bankruptcy is pretty serious and it requires the right representation. Here are some ways to find, and then select, the best bankruptcy lawyer for you.
Look for signs of professionalism
Before you get started, it makes sense to check in with some professional organizations. Membership in organizations such as the National Association of Consumer Bankruptcy Attorneys, is a good indication that the firm or attorney is up to date on the latest developments. Once you locate a few members in your area, visit the web site for your state's bar association and check their certification. Most states will have special certification requirements for practicing bankruptcy law. A certification is given when the lawyer has been practicing for a minimum number of years and spends at 50 percent of the time on bankruptcy cases. A peer review and a passing score on a written exam will also be required.
Credentials and association memberships will give you the assurance that an attorney has all the practical knowledge necessary to help you, even if your case gets complicated. It will also tell you that the attorney takes professionalism seriously.
Prepare to interview a few bankruptcy lawyers
After you have found a few firms or lawyers that look interesting, take a look at their web sites. They should include a clearly written statement of educational information about bankruptcy, plus financial forms that you can download and in preparation for filing.
Schedule a few appointments and as for a free consultation. It may be tempting to go with the first one you like, but plan on seeing more than one. You should feel perfectly comfortable with the attorney and confident in his or her abilities. To save time, complete any forms you find on the web site and bring them along. Bring a list of questions you might have and use the same list of questions with each attorney. The answers you get may help you determine which one to hire.
What should you look for in a bankruptcy lawyer?
While professionalism and rapport are important, it is also essential that you trust the person you hire. Look for the following qualities during your initial consultation.
Do they discuss with you the alternative bankruptcy solutions? For example, an attorney should tell you that a Chapter 7, or complete cancellation of eligible debts, isn't the only answer. Other options should be explored whenever possible, such as credit counseling or negotiation with creditors. A Chapter 13 bankruptcy might also be on the table if you have enough income to support at least some of your liabilities, or if you own property that could be seized in a Chapter 7 filing. It is important to understand the full range of possible resolutions before making a decision that you could later regret.
Does the attorney express a passion for his or her profession? It is important that your lawyer is personally involved and enthusiastic about the process. Many attorneys find their work rewarding and fascinating. Find out what drove them to specialize in bankruptcy law and listen carefully to the response. To be honest, there are few other practice areas where an attorney can do so much good for a client in such a short period of time.
Do they listen to you closely and understand your situation? Declaring bankruptcy can be a painful decision and there are plenty of emotions involved. You will want an empathetic attorney who is interested in helping you reach your goals, but who also shows a willingness to ask you probing questions. If the lawyer doesn't ask you how you about your biggest concerns, or what got into your financial predicament, he or she may not be viewing you as an individual. You should walk out of your meeting feeling like the attorney really wants to help you.
Filing for Chapter 7 bankruptcy can be stressful enough, but then your Colorado bankruptcy lawyer informs you that you must attend something called a "Meeting of Creditors" before your debts can be discharged? That might be enough to make you wonder what you got yourself into. Good news! There is no reason to fear this hearing when you have an experienced bankruptcy attorney by your side.
What is a Meeting of Creditors?
When you file for Chapter 7 bankruptcy, the meeting of creditors is a short court proceeding where the bankruptcy trustee and your creditors can ask you questions about your finances and the information you supplied in your petition while you are under oath. This meeting, which is also known as a 341 hearing, is essential in determining whether the papers you filed are accurate and complete.
Who Will Be at Your Chapter 7 Meeting of Creditors?
Typically, the Chapter 7 bankruptcy trustee will moderate the meeting of creditors, which means there will be no judge present. In fact, most Chapter 7 bankruptcy filers don't see a judge unless they are facing an objection or reaffirming a debt. In any case, all of your creditors will be invited to attend this meeting but they rarely show up. This is because creditors have a very short period of time in which they will be allowed to ask questions so they don't benefit much from being there. However, if a creditor has reason to believe you are hiding assets or committing another form of bankruptcy fraud, they may show up to present such evidence.
What Happens at the Meeting of the Creditors?
In most cases, you will only be examined by the bankruptcy trustee, but remember, your meeting of creditors is open to the public and several hearings are held within the same time period so you may have other debtors observing your hearing as they await their case.
When your case is called, you will go before the desk of the trustee to be examined under oath. You will be asked to provide the trustee with your full name and provide identification as well as your social security number. Since Chapter 7 bankruptcy authorizes the court to sell your nonexempt assets, most of the trustee's questions will focus on these assets.
After the trustee questions you, your creditors are allowed to examine you as well. If a creditor comes to the hearing, you may be asked about the nature or location of your assets; however a creditor will not be allowed to conduct a lengthy investigation at this meeting.
After the trustee and creditors have finished their examination, the trustee will conclude your hearing. Unless the trustee requires more information, you won't have to come in for another hearing like this. You can expect to receive your discharge once all the other requirements are satisfied.
If you have more questions about the process of filing Chapter 7 bankruptcy in Colorado, schedule a consultation with a Colorado Springs bankruptcy attorney.
Photo Courtesy of Stuart Miles / FreeDigitalPhotos.net
In some circles, bankruptcy is viewed as a taboo subject. People immediately assume that those who file for personal bankruptcy are simply irresponsible with money or they are trying to escape from paying their bills. In reality, however, this is rarely the case.
Bankruptcy attorneys and other financial experts are quick to point out how many successful people they know who have filed for bankruptcy in the past. The fact is that bankruptcy offers an individual protection from creditors who might otherwise place an enormous burden on them.
Without bankruptcy protection, people who are saddled with debt would be at the mercy of their creditors, who could file judgments, garnish wages and place liens on their property. Bankruptcy allows an individual the opportunity to prove to their creditors that he or she is not capable of meeting expenses, while allowing him or her to make an attempt at restitution.
Why is an attempt at restitution so important?
Bankruptcy filers are often judged harshly by those who assume they are just trying to escape debt. They wrongly believe that one's personal bankruptcy allows them to get off the hook completely. While some of the filer's debts may be discharged in Chapter 7 and Chapter 13 bankruptcy, the court still requires them to make an attempt at restitution. In a Chapter 7 bankruptcy, the filer must forfeit any assets that are not protected, or exempt, by state bankruptcy laws. The proceeds from the sale of these assets is then used to pay back creditors. In Chapter 13 bankruptcy, filers are expected to create a repayment plan with the court, which essentially settles their debts over a period of 3 to 5 years.
While restitution may not be complete, it is an important aspect to bankruptcy protection because it requires the filer to bear some responsibility instead of walking away debt-free. Personal bankruptcy is certainly not something one should aspire to, but for most people it is a much better alternative than hiding from creditors. It offers protection from creditors and it offers a means to a fresh start. It is wise for those seeking protection to work directly with a Colorado Springs bankruptcy attorney for advice on starting the process.
How will bankruptcy affect your credit score?
Even those who are willing to deal with the emotional repercussions of bankruptcy might not be so thrilled about the damage it will do to their credit score. In fact, other than emotional stress, credit score is what filers worry about the most. It is true that a bankruptcy filing can show up on your credit score for up to ten years, so If you find that bankruptcy protection is the best option for your financial future you will want to start repairing your credit score as soon as possible.
The following are a few considerations to help Colorado residents with repairing their credit score.
Finally, if you are considering bankruptcy in Colorado, consult with an experienced Colorado Springs bankruptcy lawyer. Be prepared to ask questions and learn about all of your options before making a decision.