When to declare bankruptcy

Being declared bankrupt may be the last thing that you would want. However, it may be better to be in this situation so as to salvage your financial condition. When you find yourself unable to pay off your creditors and when you are barely making enough money to cover monthly expenses, declaring bankruptcy may be the best option. So, when would it be best to throw in the towel?

Indicators that your financial position is at risk

  • You are not really sure of the amount of money that you owe. It is an estimated amount, but not an exact figure.
  • Bill collectors are calling you
  • You rely on the use of credit cards to settle payments for basic necessities
  • The payments that you make on your credit cards are quite minimal
  • You are considering debt consolidation so as to get out of debt
  • You feel anxious and not in control whenever you think about sorting your finances
Filing for bankruptcy

Filing for bankruptcy

The above indicators paint a very tough financial situation. In such cases, all that may be occupying your mind is the huge amounts of debts that you owe and the reality that you may possibly not pay them off anytime soon. When you discover that you owe more than you earn and may afford to pay off the debts, it is an indicator that you should probably file for bankruptcy. Note you should earn an income which is below the level stated by the law so as to qualify for bankruptcy.

However, if you are to consider filing for bankruptcy, do note that not all debts may be discharged. The following debts should be paid even if an individual has been declared bankrupt:

  • Student loans
  • Taxes
  • Criminal restitution and court fines
  • Personal injury caused by driving under the influence of alcohol or drugs
  • Alimony
  • Child support

When you are ready to be declared bankrupt, you should ensure that you will disclose all your assets and liabilities. Failure to do so may mean that some of your debts will still need to be paid off even after being declared bankrupt.

You may declare bankruptcy after ensuring the following areas may not be adversely affected:

Pension plans and insurance policies

Find out if your policies will not be affected by bankruptcy. Some insurance policies and pension plans are protected by state laws and are not affected by bankruptcy proceedings.

Mortgage

You should ensure that you will not risk losing your home. The challenge of paying your mortgage may be made easier if your other debts will be discharged. Filing for Chapter 7 bankruptcy may lead to the loss of your home if a lot of equity is invested in it. It is advisable to file for bankruptcy under Chapter 13 if you have a higher income.

Credit card debts

Credit card debts

Credit card debts

These may not be discharged if you spent beyond your means or if you were not honest in your card application. Although bankruptcy is effective in wiping out such debts, if the mentioned cases apply to you, filing for bankruptcy may not be a good idea.

Declaring bankruptcy is not an easy decision and requires a lot of factors to be considered. However, when you admit that you have a problem with your finances and need a solution, you are on the right track. You then have to weigh in the options that may solve your problem and decide if declaring bankruptcy is the best among them.

What Should You Do When Your Employer Stops Paying You?

No worker can do without being paid because they depend on their wages to support themselves and their families. A person can love his or her job and enjoy associating with co-workers but that just isn’t enough. As a rule of thumb it is advisable for employees to take an active role in regards to their paychecks and not only keep track of the hours they work but to also verify that they are being paid the correct amount.

 Rectify a delayed or incorrect paycheck

Rectify a delayed or incorrect paycheck

There are various things that employees can do to rectify a delayed or incorrect paycheck: speak to the employer, follow the proper grievance procedure for his or her agency, speak to the trade union, meet with ACAS in the UK, and/or meet with a tribunal. The first thing someone should do who isn’t being paid properly is speak to his or her employer because there could have been an honest mistake made such as a digit accidently omitted from a bank routing number or later than usual mail delivery.

If there wasn’t an honest mistake the employee should orientate him or herself towards his or her employer’s grievance procedures and follow the procedures per the agencies policies and if there isn’t a formal grievance procedure, write a letter with documentation to the employer explaining the situation with an appropriate request for the situation to be rectified.

At this point if nothing has changed or improved the employee should request assistance from his or her trade union if there is one. If available, employees should join a trade union because they are in a stronger position to negotiate with employers on behalf of employees than employees are by themselves.

The employee can also take the employer to a tribunal if his or her grievance did not obtain the results he or she was hoping for. However, the employee should notify ACAS before taking the employer to the tribunal. ACAS refers to a company that offers individual support to help with employment difficulties. The organization seeks to see if the employer will negotiate with them without going to the tribunal.

This is done by filling the early reconciliation form which is available on the ACAS website. Once an employee has gone through all of the appropriate steps and the issue has not been rectified, it is advisable to quit. What tasks are there for you? How do you benefit from the job? If these questions can’t be answered by the employer, then there is no point working without pay.

Take employer to tribunal

Take employer to tribunal

If the employee is completely sure that his or her employer is not adhering to the Employment Standards Act law, he or she can take it a step further and file a claim with the Labor Board. However, If the employer promises to rectify the situation the employee should follow up frequently until the situation is either rectified or he or she obtains other employment.

If it appears that the employer isn’t going to follow through with his or her promise the employee should update his or her resume and begin interviewing for other jobs. However, if the employee decides to stay in the workplace, he or she should stay oriented to any changes that are made within the organization. The employee might want to keep his or her reasons for remaining with the organization private as to avoid any further exploitation from the employer.

The best advice is for the employee to quit and look for an employer who is in a position to pay him or her regularly and on time. However, many employees struggle with this decision because they are scared of becoming unemployed, experiencing a hard life, and being unable to provide for their families. They hold on to the hope that the employer will have a change of heart and pay them appropriately. In this situation the employee should take the time to follow the proper procedures and effectively deal with the issue at hand.

How will you repay the principle one day?

Taking a loan may be an easy and fast process. However, if you fail to plan how you will repay it, you are going to have a hard time. Financial planning and management goes a long way in ensuring that you have a good financial position and that you are able to clear debts in the shortest time possible.

An endowment mortgage is defined as a loan arrangement in which the borrower pays interest only to the lender while the installments of the principal are paid into a life insurance policy. The maturity date of the policy is similar to that of the mortgage. These plans are usually run for a period of 10 to 25 years.

An example of this is when a borrower has an interest only mortgage valued at $200,000 for 15 years, they are expected to pay the interest on the amount borrowed each month. The full amount of the principle, which is $200,000, is expected to be paid at the end of the term of the mortgage.

  • Paying off the loan as soon as it matures

Repay the principle as soon as it matures

Repay the principle as soon as it matures

The main aim is repaying the principle. And it is not simply paying it off, but doing so within the soonest and the shortest period of time possible. Therefore, a lot of sacrifice and discipline will be required so as to meet this goal. Note that the value of the principle will decrease over a period of time. This is due to inflation.

As a borrower, you should make arrangements on how you will save up the money so as to pay off the loan when it matures. The lender plays no role in making loan repayment programs. You may pay off the principal in the following ways:

  • Frequent savings

You may have a standing order placed on your account so as to instill a sense of saving discipline. You may direct your banker to send money frequently from your checking account to a savings account. The amount of money that you pay towards your loan may be increased. This is possible if you have some disposable income after settling your monthly expenses.

  • Extra cash flow

If you happen to receive an annual bonus or an income tax refund, this extra source of income can be used to cover the loan repayment.

  • Investing in income generating business

Proper use of your money involves investing it in high return ventures. These profits will give you an extra source of income and such cash flow will enable you to have more ability to pay off the principle.

  • Inheritance and gifts

Inheritance & gifts

Inheritance & gifts

If you are lucky enough to receive gifts or inheritance, you will be able to use this to pay off the principal.

Proper planning ensures that you will be able to pay off your loan when it matures. With this, you will avoid less attractive options such as extending the mortgage term, remortgaging or downsizing.

As the loan repayment is an expense that you are aware of, good planning ensures that you will not be overwhelmed when the payment is due. As windfall payments such as inheritances or bonuses are not a sure thing, your efforts during the mortgage will go a long way in securing your finances, and even your home and other assets, when the mortgage is due.

How To Declare Bankruptcy

Bankruptcy is the legal status of an individual or an entity, in which they are not able to pay the debts that they owe to creditors. Although bankruptcy is declared by court orders, it is an individual who initiates the process. In the United States, bankruptcy cases are handled by the federal courts. Such cases are guided by the rules under the U.S. Bankruptcy Code. So, how do you declare bankruptcy?

Declare bankruptcy

Declare bankruptcy

As an individual, you qualify to declare bankruptcy under Chapter 7. However, so as to qualify for bankruptcy under Chapter 7, your income should be below a given level. So as to pay off your creditors, your property may be liquidated. If you had borrowed secured loans, the options you will have are to pay the creditor an amount which is equal to the current value of the property, allowing the property which you used to secure the loan to be repossessed or to have the secured debt eliminated.

Steps for Filing Bankruptcy     

               

  • Find out if you qualify

This is the first step that you need to take if you wish to file for bankruptcy. You should qualify for bankruptcy under the conditions stated by law. As earlier stated, your income should be below a given level. Thus, if you still have some income left after paying off your monthly expenses, you will then have to file for bankruptcy under Chapter 13.

  • Fill the bankruptcy forms
Fill the bankruptcy forms

Fill the bankruptcy forms

The bankruptcy forms are downloadable from the U.S Court’s websites. They are a large number of forms, where you are required to fill in your incomes and expenses, properties and debts in full detail. Do note that if you fail to list a debt, it will not be discharged after being declared bankrupt. This means it will continue after bankruptcy.

It is recommended that you fill the forms with the assistance of an attorney. However, should you may decide to fill the bankruptcy forms without the help of an attorney (pro se), the non-attorney prepares may assist you with the paperwork.

  • Receiving a bankruptcy trustee

After filing for bankruptcy, a trustee will work on behalf of you towards your creditors. This trustee is assigned to you by the courts. The trustee determines the property that you get to keep as well as ensuring the verification of the information that you filled out in the bankruptcy forms. The trustee is also tasked with liquidating non-exempt property. However, this is under the guidance of the rules which dictate which property is exempted from liquidation. These rules vary from State to State and thus it will greatly depend on the State you are in.

  • Credit counseling and debtor education

As an individual filing for bankruptcy, you are expected to receive credit counseling as well as debtor education. Before filing for bankruptcy, you are to get credit counseling, whereas after you are declared bankrupt, you should receive debtor education. Before the debts are discharged, you are expected to present the Certificates of Completion to prove that you have undergone credit counseling and debtor education. However, ensure that you undergo these with agencies approved by the Department of Justice.

  • Attend the 341 meeting                                                                                

This is an official meeting that is held with the creditors at your trustee’s offices. Its name refers to section 341 of the Bankruptcy code. You are expected to state why you are filing for bankruptcy and answer questions related to your debts. In this meeting, arrangements related to the property that was secured as collateral as well as selling off your non-exempt property are made.

  • A permanent orderBankruptcy discharge

After this, you may be awarded with a bankruptcy discharge. This is a permanent order that legally makes you to no longer be liable to creditors. Thus, they should not take any legal action against you or communicate to you with regards to the debt. The bankruptcy discharge may be expected to take effect 60 days after you, your trustees and creditors hold the first 341 meeting.

Good Vs Bad Debt

Financial knowledge awareness, knowledge and management is essential so as to ensure that you take actions that may build your wealth. However, at times we may need some extra funding in the form of loans. Is there good debt or bad debt? So as to understand these concepts, do read on.

Which debt is good?

Which debt is good?

  • Good debt

This is a debt which is considered positive, as it is expected to give you returns or earn you an income. An example of this is mortgage loans. Such debts can also be tax deductible, as is the case when the amount of the loan repayments is higher than the income from rental payments. This makes the borrower entitled to negative gearing.

  • Bad debt

Bad debt is that which is spent on the purchase of items that do not appreciate in value over time. In addition to this, it does not earn you any income nor is it tax deductible. Examples of such debts are using loans or credit cards on entertainment, luxury items or to take a holiday. Bad debt is also one which is taken so as to cater for

  • Which debt is good?

The argument posed has always been that good debt is good, whereas bad debt is bad and that it worsens an individual’s financial standing.

Good debt offers individuals good financial prospects in the long-term. This is the case when one invests in their business, borrows a loan for a car that they can afford, takes up a student loan or takes a mortgage. Good debt should not be used to pay off another debt as it leads to more costs in terms of interest, instead you should go for consolidation loans.

Good debt offers good financial prospects

Good debt offers good financial prospects

Bad debt can be used wisely when the credit card debt is paid by the end of the month to avoid being charged higher interest fees. Generally speaking, bad debt is good only when you can pay it off in the short term.

However, purchase of luxury items would be considered as excessive spending. It is not a good financial decision and neither is it an investment. The use of bad debt requires discipline as one should not exceed their credit limit.

The access to a pool of funds tempts individuals to spend more than they should, leading them to further indebtedness. Credit cards also have a high interest rate, which takes a hit on one’s financial position.

Good financial decisions involve the purchase of items that appreciate in value. It is clear that it is only good debts that offer you with such assets and returns. A sound investment is only possible with good debts. Good debts are also payable over a longer period of time, whereas bad debts have a higher interest rate and need to be paid using one’s next expected salary, as is the case with payday loans or credit cards.

They often lead to a vicious cycle of indebtedness as one may need to borrow more money so as to meet their needs or to pay off the loan. Bad debts are enticing as they offer quick and easy access to funds but they have detrimental effects in the long run. Make wise financial decisions and keep away from debt. If you really need to borrow money, make a good decision and let it be good debt.

Card Debt Trends

Credit cards give the borrower access to a pool of money. They get to borrow money which does not exceed their credit limit. The cost of living is on the rise and so is the cost of debts as well as the update of loans by most individuals. As an individual’s cost of living becomes higher than their flow of income, they will seek out sources of funding so as to get by. There are various options available ranging from payday loans, peer to peer loans and debt consolidation to credit cards.

credit card debts

credit card debts

The use of credit cards is common among many individuals across the world. This also applies to most citizens in the USA. The numbers seem to be on an upward trend with each passing year.

As per the data recorded in the third quarter of the year 2015, US consumers owed credit card debts that amounted to $712 million. The average amount of credit card debt owed by each US household was $15355.

Data related to the nominal income and the cost of living was recorded over a period of 12 years (2003-2015). Between 2003 and 2008, the median household income had a steady percentage increase which was higher than that of the overall cost of goods. At some point in the year 2008, the increase in the percentage of both the nominal income and the cost of living were at par.

Thereafter, the percentage change in the cost of goods has been on a gradual increase over the years. On the other hand, the percentage change of the nominal income has been fluctuating, having a downward trend between 2008 and 2010. From the years 2010 to 2015, the percentage change of the median household income has been steadily increasing, but at a rate lower than that of the overall cost of goods.

In as much as the number of credit card users and the amount of debts owed seem high, there is a possibility that the figures may be higher. This is because most individuals are usually shy to state the amounts of debt that they have. It is likely that most borrowers state half the amount that they owe while others may not know the total amount of their debt.

The following reasons indicate why the cost of debt loans is increasing:

  • The credit card interest amounts to $2500 or higher

Consumers incur an average cost of $2,630 annually on interest charged on their credit cards. This is calculated with the assumption that the Annual Percentage Rate is 18%.

  • The cost of debt increases as one’s income increases

credit limits

credit limits

High income households have the advantage of getting higher credit limits. However, this is not the case of low-income households. Therefore, the higher the amount of the credit card debt that a low-household income incurs, the higher the percentage of the amount owned up by the debt on their annual income.

The spending of higher income households will not affect their finances as much as it does to lower income households.

These card debt trends prove that in as much as the credit card is a popular means of getting funds, the impacts are negative and lead to further indebtedness. The interest rates are higher than any other type of loan and the rates seem to be on a constant upward trend. Take charge of your finances and do not be part of the borrowers counted as statistics in credit card debt.