How to File for Bankruptcy

Filing for bankruptcy is a very viable, and sometimes, the only option that can be used. When all your financial plans are going downhill and you cannot work out a way to get yourself out of large sums of debt, then in some cases, filing for bankruptcy can be a very feasible option. Filing for bankruptcy protects you from further loss and debt.

Not a lot of people are aware of effective use of this option and a very few are well educated about the procedure to file for bankruptcy. The standard procedure is quite simple but it needs a little planning beforehand. The person filing for bankruptcy must acquire credit counseling at least 180 days prior to applying for bankruptcy. This credit counseling is to be necessarily provided by an organization approved by the government.


A person applying for bankruptcy also has to finish a debtor education course in order for the debts being held to be paid. To file for bankruptcy, a person has to have at least basic knowledge of the aforementioned things and also an understanding of how bankruptcy works, how it may be helpful what pros and cons are associated with it.

  • Debtor Educators and Credit Counselors: Under the US Trustee Program conducted by the Department of Justice, the department has approved select organizations to discharge duties of debt education and credit counseling for people who wish to file for personal bankruptcy. Those centers which have been approved by the government are the only ones who can advertise this service. These organizations can be found on the US Trustee Programs list for debt education and credit counseling. This program, however, does not function in North Carolina and Alabama. In these two states, officers of court titled Bankruptcy Administrators provide the approved debt education and credit counseling education courses.
  • Requirements for Credit Counseling and Debtor Education: Both the programs are not run simultaneously as per the requirements of filing for bankruptcy. Credit counseling is to be taken up by the applicant before filing for bankruptcy. On the other hand, debtor education has to be completed after filing for bankruptcy but before the debts of the applicant can be discharged. Among the paperwork to be submitted towards filing for bankruptcy, a certificate for completion of credit counseling is also required. In the same manner, proof of debtor education completion must also be submitted before the discharge of debts take place. Again, these certifications are to be issued only from those organizations which have been approved by the Department of Justice under the US Trustee Program. The certificates are numbered to make them fraud-free.

Credit counseling has to include sessions on the subjects of personal budget, options other than bankruptcy and state of personal finance. It can be conducted in person, through the internet or on the phone.

Sessions on debtor education programs should include subjects regarding the use of credit, money management and budgetary planning.

These courses are charged around $50 – $100 but can be waived for those who can’t afford the fees upon request.


Student Loan Consolidation: Pros & Cons

Most students start looking into their loans after they are done with college or are almost there. That is when they give a hard look at their finances and wonder how they have managed to get thus far and how are they going to keep their loans up to date for the rest of the duration, right until when it is all covered and paid. One option a lot of these students are looking into nowadays, is consolidating their student loans. While considering a consolidation plan, students first need to educate themselves on the advantages and disadvantages of such a program.

Taking student loans entail a different and separate loan for every school year. Since each loan is separate, it has to paid back in the same manner, separately. Every loan also has a different interest rate. All the student loans granted by a federal authority have a ten year payback duration. This means a student has to pay back multiple loans at multiple interest rates for a period of ten years. This way, things may get complicated and out of hand. The multiple interest rates are also higher in comparison.

The major reason for the increase in popularity of student loan consolidation is precisely this. By consolidating all the loans, a student can get a fixed interest rate. This interest rate is usually lower than those offered by the multiple student loans. Things can be kept simple, as there is only one monthly payment to be made to cover for only one loan. The monthly amount is also lesser through consolidation. The duration of repayment of loan can be extended which facilitates the lower monthly payment.


Consolidation of student loan can work if the student is well aware of the risks and terms associated with it.

  • Pros: The most important and immediate advantage of student loan consolidation is the opening and improvement of cash flow. Since the monthly payments fall significantly, it allows for more breathing space, especially for young graduates who are still trying to get a hold of their finances. A fixed interest rate is also a big advantage. The rate you are going to pay will be the same over a ten year term. This protects students against rising interest rates which occur regularly. The loan payments may also qualify for being tax deductible which can lower tax liability for you.
  • Cons: As it goes with any loan, a longer duration means you are going to pay for more number of months. This can dent you more than help you if you get a greater interest rate. You will have to pay more in interest amounts over the years. You will also have to make payments for a longer duration. A longer repayment term also means that you are not going to be debt free of your student loan for the same measure of time. Chances are that, due to these prolonged payments, the consolidation may become a hindrance in your financial growth.

It is vital to weigh all these aspects and check whether consolidation of student loans is suitable for you or if you should look for other alternatives.


Things to Avoid While Seeking a Small Business Loan

Often, the small business owners blame the lenders when they are turned down for their loan application. But the fact still remains that the small business owner is at fault sometimes due to the wrong approach of the loan application. Loans are similar to marriage proposal they say, you need to be a hundred percent sure before you ask. Here are some tips to help you along with the small business loan application.

First of all, you don’t need to rush to apply for a bank loan. People often rush things thinking that it is only a form that needs to be filled and submitted to apply for a loan. This is not even the first step of loan application. Before you even apply, you should start grooming your business to get accepted for the proposed loan. The first step in this regard would be to get a copy of the credit report of your business. You are allowed one free copy of credit report each year from the three major credit reporting agencies. If you have already ordered it once during the year, then you can buy the additional copies. In the report, you should look for red flags which will get noticed by the lenders. The red flags indicate the late payments, too much borrowing, accounts sent to collection agencies and so on. The same thing is to be done with your own personal credit report.


After you have turned the red flags into green, go through a simple restart of the business. Update and change your business plan a little to include the specifics on how you wish to spend the money that you will borrow. You need to make it clear on how you will operate the business once you get the loan and mention the projected revenues and costs. The lender will get confidence in letting you borrow money if you provide all this information. At the same time, not all lenders are the same. They vary greatly in their strategies, expertise, specialties, philosophies and standards. So you need to be careful of who you want to apply to. A rejected loan application will not be good for your business in the future. If you apply too many times to the lenders, it will affect your company’s credit score.

Talk to business advisers to get the best lender for your type of business loan. You could also attend seminars on such topics, or visit a financial institution or go through a trade journal and search for the right lender you are looking for. Once you find the best lender to whom you can approach with your business idea for a loan, then you can try to give it your best shot. Prepare your documentation in advance and a thorough business plan which you will able to pitch perfectly to the lender. Follow these tips so that your loan approval is not delayed and gets approved easily.


Financing Essentials for Your Home Improvement Project

In today’s world, homes have proved to be big assets for everyone. More and more owners are taking a decision to improve their lifestyle by remodeling their homes. This will also help in increasing the value of their homes. Home improvements and remodeling are proving to be successful investments not just because it is increasing the property value but also it is helping them enjoy life in their new and improved homes. To move in the right direction, you need to find out easy financing methods to give your old home a new and better look. Here are some of the ways which will help you in this regard.

The first important and essential step in funding your home improvement project is to qualify for a loan. Oftentimes, your credit report will be an influencing factor on which route to take on financing. Before settling down with a decision and applying for a loan, you should find out from various lenders about the options available to you about your finance. You need to be careful as the different lenders will focus on what they can offer but you need to make a calculated choice and choose the one which suits you the best. To get the best estimate, you should go for a broker who is well established as he will have various types of loans. An established broker will help in making you understand the various options available and also the trade-offs. He can also get you pre-qualified for multiple loans.


You need to have a fundamental understanding of rate of interests, points and other details of your loan agreement. Some of the loans involve points. Points here refer to the fee for a loan which is expressed as some percentage of the amount of the loan. One percent is equal to one point. For example, if you take a loan of $60,000 and the rate of interest charged by the lender is two points, then the fee would be $1,200. These points are for the lender to pay for loan setup expenditures and also his profit. It is easy to understand the interest rates but requires diligence to make sure that your financing is easy and responsible one.

There are a lot of people who now know the difference between variable interest and fixed interest, which was a major contributing factor in housing crisis. For a loan which has a fixed rate of interest, the interest amount stays the same throughout the duration of the loan. For a loan which has variable interest, the rate of interest will fluctuate depending upon the market conditions. The future prediction is that the rate of interest will go higher in the years to come to tackle inflation, thereby the variable interest rate is not being preferred much. So it is definitely better to go for a fixed interest rate loan. These are some of the basic information that you need to know before you go out and look for the potential lenders for your home improvement project.


Business or Personal Bankruptcy

When you have decided to go in to file for bankruptcy, one more important decision stands to be made. That is whether to opt for business bankruptcy or personal bankruptcy. This is so because businesses are legally treated as separate entities. A business may fall under any of the categories such as C corporations, S corporations, Limited Liability Companies, or partnership companies. Bankruptcy can be filed for the business as a separate entity or for the business owner, or both of them, but separately. This decision is also important and has to be made after careful research and knowing what best suits the needs of the business and its owner.

In case of small business organizations, owners generally prefer to file for personal bankruptcy and that prevents the business from operating any further. This is done so in order to protect the personal interests of the owner being put to risk to cover for the loans taken by the business. This also enables the owner to close the debt of the business sooner and at lower losses and start a new entity which is free of debt.

A lot of business entities put a limitation on the business debt liability that can be made by the owner. This clause restricts the payment of business liability to be paid. The debts created by the business entity have to be cleared by the business itself. Therefore, the owner is protected from paying for business debts. This is true under all conditions. The only exception here being if the owner guarantees a loan taken by the business. This has led creditors to acquire owner guarantee for business debts as well. They can have a way to collect their lent amount from the owner in case the business fails to perform. This is basically the reason why many business owners opt for personal bankruptcy while filing for bankruptcy.


If a business is filing for bankruptcy, it is clear it has no assets or means of paying its creditors. Loans taken by the business, if guaranteed by the owner, creditors have a chance to collect their due from the owner. If the creditor has not acquired owner guarantee, then he can’t hold the owner responsible for any outstanding debt held under the business.

In a scenario where the business loans are not guaranteed by the owner of the business, the owner generally opts for filing business bankruptcy. This protects all assets and incomes held by the owner. A creditor cannot take hold of those personal interests to cover for the amount he has lent. Loans taken under the business name have to be remitted by the business only. Creditors can close or sell the business and use the money gained to get their loaned amounts back.

On the other hand, if a person wants to continue the business later, then it would be more sensible to opt for personal bankruptcy. Doing so also gives the owner an opportunity to start a fresh business without any debts.


Traps of Debt Consolidation

One comparison that can be made between politicians in election year and debt consolidation programs is that promises are many but they do not always live up to their promises. Most institutions offering these services promise the lowest and most competitive rate of interest, low monthly payment and convenient payment options. In reality though, the scenario is the exact opposite. High fees, greater payment through monthly interest and further debt are common complaints among several who avail this facility.

Most people who go in for debt consolidation loans are surrounded by high credit card debt. They use this loan to pay credit card debts which are ever mounting. The advantage of doing so is it cuts down the monthly payments and clears the debt sooner. The problem is when debt consolidation is used to mask an issue instead of fixing it.


These four pointers may be helpful in determining if you are falling prey to some trap of debt consolidation.

  1. Debt consolidation, if used as a fix all measure, means the person doing it is digging a deeper debt pit to fall into later. The main purpose of a debt consolidation program is to get rid of all debt an individual may hold. Research shows a picture not matching the above theory. It has been found that those who take debt consolidation loans are ending up in greater debt sooner or later. This pattern has been interestingly explained. When all credit card debt is cleared by a consolidated loan, users tend to make full use of the new credit limit they acquire only to end in greater debt sooner or later. Sounds a lot like yo-yo dieting, doesn’t it?
  2. Some of the debt consolidation services on offer are very expensive. If you have not done your homework well enough and picked an expensive service, then you will end up paying a lot more than your original debt. Service providers charge a sizeable sum in terms of interest, fees and other hidden payments. A provider charging a lot under these labels should definitely be avoided. Otherwise, the loan would be of greater harm than good and you may end up paying a lot more over a period of time. Try to be your own debt manager and use consolidation programs when other things do not work out for you. Minimize the use of high interest credit options.
  3. The rate of interest and terms of payment are of utmost importance when considering a debt consolidation loan. The loan will help bring down monthly payments. The hidden problem with this solution is you will be making these monthly payments for a lot more months. This is because you will be paying a lot of money to cover for the interest you will be charged by the loan provider.
  4. If you have consolidated your loan through line of credit or home equity, it may seem a reasonable idea but what it means is, now your home is on the line. You have to give the pink slip of your home as guarantee to the loan provider that you will cover the loan.

Guidelines to Get Business Loan Approval

If you are an owner of a small to medium sized business and have previously applied, successfully or unsuccessfully, for a business loan, then you may be aware that banks are not most eager to look at small business firms. This experience has been reported by a lot of people and they just don’t understand the reason behind those behavior shown to them by banks. There is a reason behind this trend and a very justified one. When people approach banks, they are unaware of what the bank requires of them in order to process their application. They are also uneducated of what they have to submit at the bank and what they have to show to assure the bank of their ability to pay them back.

Banks have no reason to hold loans if they are pleased with what you have to offer them. When speaking of small business establishments, the two most important things that matter are sources of revenue and cash flow plans. According to surveys conducted, only 34% of the applicants owning small business establishments could give proper and satisfactory answers to the two most important questions, that of cash flow and sources of revenue.


Many of these business owners were already in significant debt by the time recession hit. After that, things turned further south and they had a difficult time obtaining any further credit. Consumer spending took a steep dip with the onset of recession and small business establishments were hard hit. These business owners continue to face problems but there has been some positive vibe as small business owners have been reported to successfully take new loans and work them off well. These businesses are growing stronger and banks have been able to approve their loans much easier.

This has got people wondering about what exactly to propose to the bank so that they get loans approved quickly. Here are some pointers to that effect.

  • Cash Flow: The cash flow of an organization is a sure indication of its present condition. A steady cash flow is a sign of the organization being in good health. When the bank sees that you can present a healthy cash flow, they are more likely to be convinced of your ability to pay them back. You can show sufficient resource to settle their loan through a steady cash flow.
  • Debt Load: Another thing that banks keenly scrutinize are your debts. Your current debts are also a major factor. Banks need to be sure you can manage to pay the new debt you acquire through them. If you are struggling to pay your current debts, it will not be a good reflection on your ability to clear your additional loan.
  • Credit History: If you have a good credit record with timely payments, it will work for you as an added advantage. A good credit score is also of great help.
  • Business Ability: Show the bank officials that you are a shrewd businessman with great aptitude for business.

Important Tips for New Homebuyers

There are a lot of decisions to be made on the way to home ownership. While some of these decisions are big, there are a lot of smaller but important decisions to be made as well. You need to keep in mind the smaller ones as well to make a planned decision. Here are some of the points you should remember which will help you come to a decision easily and avoid the common mistakes which people make.

The main important thing to decide is to know your budget limits. You will be the best judge of that. Taking a wrong decision at this point will derail the whole process. You need to set a budget. You need to calculate the monthly payments you can make comfortably. This will help you in negotiating this amount with the lenders out there. This is the most important calculation you need to do as this will be the amount you need to pay each month. You should be comfortable paying this amount each month.


There are four major factors that you need to include in your budget. They are the principal amount, the rate of interest, all the types of taxes and the insurance. The calculators available online to calculate the mortgage will calculate the exact amount you will pay separately for the interest and towards the principal each month. As the owner of a home, you would also be paying property tax and also insurance towards your home. Though the taxes and the insurance are not a monthly payment, it is a good idea to include it in your monthly budget.

When buying a new home, it is also required that you make a down payment. In addition to that, there are some closing costs as well, which includes all the fees and the paperwork cost, and so on. The down payment usually ranges from 5 – 20% or it can be more. On the other hand, the closing costs could range from 3 or 4 % of the total amount of loan which will include costs like title insurance, appraisal fees, and origination fees.

One important aspect you need to consider while buying a new home is the increase or decrease of the energy bills of utilities in your new home. If you are moving in a larger home from a smaller home or if you are moving from a older home to a newer home or if the previous home was located in hot or cold climate then you need to find out from your real estate agent if they could get a rough estimate of the energy bills from the previous owners of the house. This will help you take a wise decision and also budget your expenses in terms of the usage of the utilities and you will not get a surprise when you get your first bill in your new home. You should also get an estimate of the water costs if you are moving in a new community.


Effect of Personal Bankruptcy on Housing

Bankruptcy is not exactly the best experience a person can have. It can be very overwhelming and unsettling to go through the entire process. Getting to that point when you have to file for bankruptcy is itself unpleasant enough. Under such conditions, bankruptcy is designed in a way so as to help the debtor retain the maximum number of his properties and pay the maximum amount of debt he owes at the same time. This is not an easy task to achieve.

In the midst of all this, one major concern a debtor may have is what will be done with his primary housing property. Therefore, the primary home of a debtor is a key part of the entire deal which is settled through filing for bankruptcy. The good news for debtors here is that in most cases, a debtor can file for bankruptcy and still retain his primary housing facility. Chances of retaining a house are greater if it qualifies for exemption status.

A significant factor in the decision of retaining or surrendering a house is the equity held by the house. At the time of filing for bankruptcy, some property, appropriately named exempt property, is excluded from the the debt settlement deal. The most important property on this list of exempt properties is the primary housing of the applicant. An applicant’s house qualifies to being exempt property if it is not holding any non-exempt equity against it. You can calculate this by subtracting liens and other loans on the property from the total market value of the house. The result of this calculation is known as unencumbered equity.


You will also need to know the exemptions of your home under the bankruptcy code. This figure is then to be subtracted from the unencumbered equity. If the result of this amounts to less than what needs to be paid to cover for your home, then you can retain your house. If the amount comes to more than the amount required to cover the house, then a trustee can deal the house to settle creditor claims. These figures change for every state and you need to check the state laws before beginning calculation.

Under Chapter 7 equity, a debtor is allowed to settle loans in part or full measure by liquidation of assets held by the debtor. This is done by handing over non-exempt properties to the court which settles creditor claims by selling the properties handed over by the debtor. The status of your mortgage payments are also taken into account when deciding the status of a property. Based on the above factors, the bankruptcy trustee decides which properties are to be exempt and which are non-exempt.

Through Chapter 13 bankruptcy, the applicant has to pay through the loan amount according to new plan, which may be revised according to the opinion of a judge who has the final call on the plan and terms of payment. Since the applicant pays through the debt, he is at a greater chance of holding the house to his name.


What Does Debt Consolidation Cost

Of late, a lot of literature has been written and published on the subject of debt consolidation. While the good thing about this is it has educated a lot of people on a lot of related issues, the downside of this surge is it has created as much confusion among the general public regarding debt consolidation.

There are a multitude of companies offering this service, which in basic terms is a debt settlement or management program. In fact, so many companies are extensively marketing debt consolidation programs that it is hard to answer even basic questions, like the fees and overall costs involved in the whole debt consolidation procedure.

To sort this thing out, first you will need to cut out all the overload of information and focus on the basic costs related to debt consolidation. Firstly, there are different kinds of fees which the customer is charged. Then, there are other costs related to debt consolidation. Finally, and most importantly, there is the interest.

There are several ways to obtain debt consolidation services. The facility can be availed from a bank, a financial institution or on a peer to peer lending basis. You can also avail credit card balance transfer or home loan equity.


There are several kinds of fees which you could be charged during a consolidation process, so you need to aware of all of them.

  1. Origination Fees: This is the start up fee which new customers are to pay to the service provider. All fresh applicants are supposed to pay the origination fees whether the service they are availing is loan on unsecured debt consolidation or loan on home equity. This fee is charged to pay for the initiating cost of the loan. This amount can range from 1% to 5% of the amount of loan, which is quite significant and cannot be put aside lightly. You may also be charged a fee under the name closing fee which is just the same.
  2. Annual Fees: This fee is charged mostly in case of home equity line of credit or loan on home equity. Most companies charge around $50 annually. Often, balance transfer is associated with annual fee.
  3. Balance Transfer Fee: A percentage of every balance transfer is charged as balance transfer fee. This percentage can vary between 3 and 5 percent.
  4. Late Fees: As the name suggests, this is charged for payments which are made after the afore fixed due date. This amount may reach even hundreds of dollars which is why it is best to be avoided.
  5. Early Cancellation Fees: Early closing of the loan causes loss to the company in terms of interest over the proposed period. The company covers these losses by charging the customer a downright amount of four to five hundred dollars or a percentage of the loan amount.

Apart from the fees, the only other major cost is the expected interest. The rate of interest depends on the form of debt consolidation and terms and conditions on which the agreement is finalized. The rate can be anywhere between 7%-30%. A good credit score helps get a lower interest rate.