Chapter 7 and Chapter 13 Federal Bankruptcy Rule Information

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Because of the long-term affects of up to ten years on a debtors credit report, bankruptcy should be used as a last resort. If bankruptcy is the only available option for personal debt reduction, is Chapter 7 or Chapter 13 a better option? This article looks at the different rules for filing personal bankruptcy.

What is a Chapter 7 Bankruptcy Discharge?

Chapter 7 is often referred to as straight bankruptcy because it can discharge all personal debt. Certain personal assets may be forfeited to help satisfy debt. Generally personal assets like certain home furnishings, vehicle used to travel to work and work related assets might be exempt from forfeiture. Retirement savings like a 401K or IRA are also exempt.

Congress passed legislation that makes it more difficult to file for a Chapter 7 discharge. Income limits have been established by state for a straight bankruptcy discharge. If personal income exceeds the established limits, Chapter 7 cannot be filed. The legislation passed by Congress also extended the amount of time between filings. Chapter 7 cannot be re-filed again until 8 years after the first filing.

What is a Chapter 13 Bankruptcy Discharge?

While Chapter 7 is designed to absolve all personal debt, Chapter 13 bankruptcy filing is more like a monthly installment plan. The court trustees establish a monthly payment amount and the money is distributed to pay off debts. The repayment plan is generally from a period of 3 to 5 years. Once the predetermined time expires, debts are considered satisfied, even if the debt paid is less than what’s owned.

Debtors that cannot file Chapter 7 due to income levels or other factors may still be able to file for Chapter 13 bankruptcy. This repayment type filing usually allows for the debtor to keep the majority of their assets. Chapter 13 bankruptcies also allows for shorter filing period between filings. In some cases it could be as short as 2 years between filings compared to the 8 years for Chapter 7.

Chapter 7 and Chapter 13 Filing Fees

Individuals can file for personal bankruptcy without the assistance of an attorney. Bankruptcy can be somewhat complicated and the advice of attorney is recommended. The following are the filing fees as of this year

  • Chapter 7 filing fee $299
  • Chapter 13 filing fee $274

The above amounts reflect the federal court fees; attorney fees are separate.

Bankruptcy is filed in federal courts and many of the rules are governed at the federal level. There is however some rules that are governed at the state level that may be different from state to state. A qualified bankruptcy attorney will look at the debtor’s financial situation and advise on the best course of action. Other options may include personal budget control, debt counseling services or debt consolidation.

Capital Protected FTSE Tracker — Pros and Cons: Using a Stocks and Shares ISA to Maximise Tax Free Savings

Finance

Many investors wish to benefit from positive movements in the FTSE 100 index, but they worry about the downside. Nobody wants to lose all their money on a stock market investment, but tracking an index of blue chip stocks is very different to purchasing penny shares.

According to an article about FTSE trackers in the Motley Fool, “Over the last 80 years, there have been only seven five-year periods where you would have lost out and in only two of these cases would you have lost more than 10%.”

Advantages of a Capital-Protected FTSE Tracker

  • Capital protection. No matter how badly the FTSE 100 index performs, it is impossible to lose all or any of the investment capital;
  • Stock market growth. An investor benefits from investment returns linked to the growth of the stock market;
  • Low and falling interest rates. Bank of England base rates are the lowest in decades. Fixed-rate bonds and cash ISA accounts aren’t providing savers with the returns they once did so guaranteed equity bonds provide a more financially rewarding alternative;
  • Can be put in an ISA. It is possible to benefit from tax-free savings by investing up to £7,200 in a stocks and shares ISA.

Disadvantages of a Capital-Protected FTSE Tracker

  • No dividends. A FTSE tracker only follows the value of the index. This means that an investor can lose out on receiving 4% per annum in dividend payments;
  • Capped gains. As the investment is capital-protected, potential gains are usually capped meaning that only modest returns are possible;
  • Long-term investment. All investors in a capital-protected FTSE tracker are locked in for a period of 3 or 5 years;
  • Taxation. Any money made isn’t subject to capital gains tax, it is subject to income tax. Worse still, the income all comes in a single financial year which could cause an investor to become a higher-rate tax payer.

Using a Stocks and Shares ISA for Tax-Free Savings

It is possible to put a capital-protected FTSE tracker in a stocks and shares ISA. Inland Revenue rules permit someone to invest up to £7,200 in this source of tax-free savings. This affords an investor considerable advantages, especially if a higher rate tax payer.

The reality is that those who invest in the FTSE 100 share index after a decline will do well. A simple FTSE tracker fund is definitely the way to go, but not everyone has the constitution for this. If this is the case, put a capital-protected FTSE tracker in a stocks and shares ISA to maximise tax-free savings.

Debt Collection Agencies Not Helping Borrowers: Are Personal Debt Repayments Set Too High?

Money

Excessive, unmanageable personal debts have resulted in a growing demand for Debt Management Plans. The Times recently stated that 700,000 consumers had already turned to debt repayment plans where a lower repayment is made based on affordability. Struggling borrowers are now complaining that debt collection agencies are failing to co-operate and placing them under undue pressure.

Debt Collection Agencies Rejecting Debt Management Plan Proposals

Individuals struggling with financial difficulties claim that debt collection agencies are proving less than co-operative once missed or late payments have become an issue. This is despite the fact that they purchase full collection rights with respect to defaulted accounts- often for less than 30% of a loans value. Instead of helping borrowers to make realistic monthly repayments, there are complaints that:

  • Borrowers are being pressured into making unaffordable monthly repayments.
  • County Court Judgements (CCJ’s) are being taken out against a borrower so they can pursue a Charging Order at a later date.

County Court Judgements (CCJ’s) and Charging Orders

A County Court Judgement (CCJ) may be taken out by a lender when a borrower has defaulted on a credit agreement. A Charging Order can then subsequently be pursued which turns an unsecured personal debt into a loan that is enforceable against the borrower’s property. A CCJ needs to be issued by the court before this can ever happen. Always attend court and present the judge with a full budgetary breakdown; it is unlikely that the court will then agree to the Charging Order taking place.

Northern Rock Is the Least Helpful with Personal Debt Problems

Borrowers with financial difficulties may be surprised to discover that recently nationalised Northern Rock is amongst the least supportive with regard to personal debt problems. Chris Jary, a debt counsellor for Action for Debt, stated that: “Northern Rock is one of the worst for harassing borrowers. They do not listen to people’s individual circumstances or take into account the customer’s other personal debts.”

Pay What Is Affordable with a Debt Management Plan

Tom Howard, of the Consumer Credit Counselling Service (CCCS), stated that: “A borrower can repay only what they can afford. If a debt-repayment plan has been properly devised by a debt charity, and the creditor still refuses to co-operate, the borrower should continue making the monthly payment outlined in the plan. Do not be bullied into paying more.”

If personal debt is a problem, never agree to offer debt collection agencies more than can be realistically afforded. It is a sure-fire way to fail, thus increasing the likelihood of a County Court Judgement (CCJ) or even a Charging Order being issued. Talk to a qualified debt counsellor before proceeding with a Debt Management Plan.

Who is an IVA Most Appropriate For? Individual Voluntary Arrangements – A Debt Solution for Serious Debt

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With spiraling levels of personal debt in the UK, it isn’t surprising that the Individual Voluntary Arrangement, also known as the IVA, has grown in popularity as a debt solution. It provides the most viable alternative to personal bankruptcy for dealing with serious debts.

What is an Individual Voluntary Arrangement?

Provided that 75% of creditors, in terms of value, agree to the Individual Voluntary Arrangement, it becomes a legally binding agreement. Unlike a debt management plan, an IVA is a way to write off debt and become completely debt free once 60 monthly payments are made. It also prevents creditor harassment.

The Individual Voluntary Arrangement and Home Owners

A home owner that declared personal bankruptcy would almost certainly lose their family home. An Individual Voluntary Arrangement allows someone with serious debts to keep their property, provided that payments are maintained for the entire duration.

Should an insolvent fail to meet the terms of the Individual Voluntary Arrangement, the Insolvency Practitioner would use the proceeds paid into the IVA to declare them bankrupt. Those who keep up with payments will be expected to get a remortgage for 80% of all available equity at the end of year 4. However, this will be based on affordability.

Personal Bankruptcy and Involvement in Speculative Activity

Insolvents who have lost money from personal loans or accrued credit card debt through an involvement in speculative activity should think carefully before declaring personal bankruptcy. Those involved in gambling or share trading can be held accountable for up to 15 years under a Bankruptcy Restriction Order (BRO).

Finances aren’t nearly as heavily scrutinised with an Individual Voluntary Arrangement as is the case with personal bankruptcy. Whilst a 5 year IVA term may seem like a long time, personal bankruptcy could prove far more punitive in certain circumstances.

The Individual Voluntary Arrangement and Protecting a Professional Status

Those working as a professional, such as an accountant, financial advisor or solicitor, would lose their status immediately if they declared personal bankruptcy. It is argued that an Individual Voluntary Arrangement allows someone to maintain their professional status.

Personal Bankruptcy and Publicity

Whilst personal bankruptcy results in the news being printed in a local newspaper and the London Gazette, this isn’t the case with an Individual Voluntary Arrangement. However, the IVA is put on a publicly available insolvency register.

An Individual Voluntary Arrangement can be an excellent debt solution for a homeowner. Although the term is longer and more has to be paid into this debt solution, an IVA allows someone to live a normal life and provides a defined term when that person will become debt free.

Hardship Grants Provide You with Fast Cash: Free Government Funding for Those in Need

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From time to time, individuals experience things in their lives that leave them wondering where to turn for help. Hardship grants provide financial assistance for individuals who really need it – whether because of a natural disaster, illness or medical condition, loss of work or something else. By understanding how hardship grants work and how to obtain them, hardship grants can help one get through difficult financial times.

Check out Victims of Natural Disasters Hardship Grants

There are hardship grants available to victims of natural disasters, typically through FEMA. FEMA or the Federal Emergency Management Association helps victims recover from natural disasters by partially replacing the things they’ve lost and providing financial assistance for housing, food and clothing. Contact FEMA via their website at FEMA or find a local chapter.

Seek Veteran Medical Hardship Grants

Some veteran’s affairs offices offer hardship grants to their veterans when difficult times come calling. This includes medical hardship grants, such as medical bills the veteran isn’t able to pay or surgery or other procedure that might need to be done for the benefit of health. Learn more at ND GOV or individuals can visit their own veteran’s affairs office to determine whether a grant like this one is available to them.

Look into Student Hardship Grants

Students who are attending college should speak to their counselors, as many colleges have their own hardship grants for their students. The purpose of these grants is to provide help to students who are experiencing difficult times or those who are from low-income families. Funds like this are also available in general for students who are having medical hardships or other hardships that may interrupt their education.

Seek Additional Grant Information

Typically, in order to receive a hardship fund, individuals will need to provide proof of the hardship, income, number of individuals living in the household, information about previous grants received, social security numbers and more. It’s important to have these things gathered before proceeding with hardship grant applications. Applicants may need copies of medical bills or other bills to provide with the grant application.

Check out Grants.gov

This website is very helpful and lists all government grants available for any kind of situation or need. To find hardship grants via this website, use the keyword search tool and click ‘submit.’ A list of grants relevant to the search will appear and individuals can check the details of each grant to see if it is a relevant grant that they would be eligible for. Applications are also available via this site. It’s a great resource for anyone who is searching for grants – hardship or not.

Contact Individual Companies

Individuals may also be able to receive hardship grants by contacting certain companies they are having trouble with. For instance, hospitals often have their own form of hardship grants that can be used to help individuals who cannot pay for their medical bills. Lots of companies do volunteer work and therefore have funds that can be used for hardships. Electric companies, water and sewer companies, hospitals, clinics, colleges and even typical businesses often have some form of hardship funds that can help in difficult situations.

The Four Golden Rules to Managing Debt: Beating Debt Before it Spirals out of Control

Finance

Debt can creep up unawares and cause a lot of misery. What begins as a small personal loan can get bigger until it spirals out of control. Following four simple steps can help resolve the problem.

1: Claim all Benefits

It is surprising how many people do not receive all the money which they are entitled to. Before taking any steps, check entitlements to benefits and tax credits. Directgov has an online benefits adviser, which calculates via questionnaire whether someone is entitled to certain benefits and tax credits.

2: Work out a Budget

It is a good idea to work out a monthly personalised budget. This involves adding up the total income and deducting the total outgoings.

  • Annual Income: Adding wages after tax with benefits and interest from savings.
  • Annual Expenditure: Adding all the annual household bills (not including the debt).

Disposable Income

The monthly disposable income is ascertained after the annual expenditure has been deducted from the annual income and divided into twelve. A clear picture will soon emerge on how much nonessentials needs to be budgeted, for instance, nights out. Martin Lewis offers excellent advice on money management, tips on how to increase earnings and to make the most of the disposable income.

3: Establishing the Debt

This is the unpleasant part, but knowing is better than avoiding the issue. This involves adding up all overdrafts, hire purchases and personal loans.

4: Contact a Debt Management Company

With the monthly expenses and the total amount of the debt worked out, it is time to contact a debt management company. Some charge for their services and should be avoided. Payplan, however, is a charity run service, subsidised by the credit industry. They will discuss the situation over the phone and work out a Debt Management Plan (DMP).

Debt Management Plan

A Debt Management Plan is an agreement between and individual and the creditors on an affordable way to pay off the debt in manageable monthly instalments. As soon as the DMP is in force, creditor’s fees and charges are stopped and interest rates frozen, and in some cases, suspended. It depends upon the circumstances and the discretion of the creditor. It must be noted that hire purchases and personal loans cannot be included in a DMP.

National Debt Line (NDL) is a charity-run service that also helps find solutions and work out DMPs. For further advice, the Citizen’s Advice Bureau is a free service that provide further useful contacts.

The bad news is that an individual’s credit rating will be affected.

The good news is that debt can be faced and overcome before it spirals out of control.

Become Free of Debt

Facing debt is better than putting it off. Claiming all benefits is a good start. This can be used to work out the monthly disposable income and work out a budget. Importantly, establish the size of the debt. By contacting a debt management company, a DMP can be worked out.

Debt Collection Agencies: Don’t Let Credit Cards and Debts Rule Your Life

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Finance companies attempt to get payment from defaulting customers, but regularly fail to achieve this. Customers may have gone missing, moved house or are just being difficult. They all present a problem and become uneconomical to collect. The debt is sold on and the remainder is simply written off against taxes.

How Do Debt Collection Agencies Make Money?

This uncollectible debt is purchased for 10-20% of the loan value by debt management companies. A £10,000 loan will often be bought for as little as £1,500 and they will then pursue you relentlessly for full repayment. What you pay is their profit.

How Can You Utilise This Knowledge?

If you have savings or can borrow money you have an excellent chance of being able to reach a full and final settlement with the debt collection agency. It is possible that you could settle your loan for 35% of the remaining sum. If you have access to cash, ask them for a settlement figure.

The Threat of Debt Collectors

You will receive countless threatening letters from debt collection agencies advising you that if you don’t pay the balance in full a debt collector will be paying a visit. What they don’t say is that the person is only allowed into your home if you let them in.

How Do You Deal with Them?

Unless a debt collector has a court order they are not allowed to force entry to your home. If you don’t open the door or leave easily accessible windows open they can’t get in. If you open the door, they may put their foot there and by then it is too late.

If a debt collector is able to gain entry they can make a list of items of value in your home and can arrange to sell them if you don’t make payment. If you don’t let them in they cannot do this.

Debt Solutions

If you have at least £100 per month to offer your creditors, you may wish to consider a Debt Management Plan. You would no longer have to deal with the creditors directly. There is also a strong possibility that interest and any charges will be frozen.

If you have multiple creditors and your debt levels are high you should talk to a debt advisor to see whether bankruptcy or an Individual Voluntary Arrangement are the right option. Both of these methods do provide light at the end of the tunnel.

How To Build An Emergency Fund: Saving and Making Money to Survive Economic Hardship and Job Loss

Job Loss

An emergency fund is money put aside for the worst case scenario such as job loss, major repairs or medical bills. How much money should be in an emergency fund? This varies according to a family’s risk tolerance and expenses. Some people might be comfortable with $1000, while others might want a year’s worth of expenses. In tough financial times, how is it possible to find $1000, let alone several months’ worth of living expenses?

Put Away a Dollar a Day, No Matter What

A dollar a day doesn’t seem like a lot of money. Over a year, a dollar a day in a savings account turns into $365, plus interest. Do nothing more than a dollar a day, and in less than three years there will be $1000 in the emergency fund. Set an achievable goal to begin the pattern of saving for tough economic times.

Create an Automatic Savings Plan

It is easy to spend money that is in a bank account. It is much harder to spend money that is in a different savings account, online savings account, or a flexible term deposit. Create an automatic savings plan that withdraws money every paycheque and deposits it in another account that is difficult to access. This money will become the basis of an emergency fund.

Create a Budget and An Allowance

Track spending over a week and a month to see where the family budget goes. Then examine areas that could be reduced. Send the found money to the emergency fund. Remember to add a small allowance so that each person in the family can spend a small amount of money freely. Just like dieting, spending a small amount of money on fun can prevent binge spending later on.

Save Money By Listing Wants and Needs

Find money by evaluating wants and needs. Running to the store for milk? Instead, place the item on a list of household needs. Once a week, evaluate the list. Does the family actually need the items? Delete items that are no longer really necessary, and go shopping for the rest.

Choose Hobbies That Make or Save Money

Many hobbies are well worth the money, but when times are difficult it is best to choose free or money-making hobbies. Instead of a gym membership, commute by bike and take the scenic route. Make extra money by writing online, for local magazines, or for community newspapers. Use thrift store craft supplies to create homemade items to use as gifts or to sell at craft fairs. Place any money saved or made into the emergency fund.

Make Extra Money: Get a Micro Job

To make extra money for an emergency fund, try a micro job. These jobs are small, but by placing the extra money directly into an emergency fund, families can build one quite quickly. Micro jobs include:

  • Delivering newspapers
  • Walking dogs
  • Tutoring
  • Landscaping and shoveling snow
  • Casual child care
  • Collecting used items and selling them for a profit

With some ingenuity and frugal common sense, it is quite possible for individuals and families to create a substantial emergency fund. An emergency fund provides a sense of security during an economic downturn, and it also provides a source of backup funds for emergencies such as vehicle breakdowns. By developing an emergency fund, families will have more financial security and will need to rely less on credit during challenging economic times.

How to be Financially Secure: What Every Family Should Know about Financial Security

Family

Every family dreams of being financially secure. It means gaining the freedom to live without worrying about job cuts, redundancies or salary reductions. As bleak as it seems now, it is possible to build financial security.

According to Australian financial expert and author of The Seven Ages of Money (Choice Books), Tim Blue, financial security is built on time, discipline, knowledge and strategy. Here is some useful information he reveals in the book.

Give Time to Build Wealth

Time will help families build wealth through compounding – the effect of reinvesting earnings from investments. Although the return may not be very significant in the beginning, over time it will grow faster and faster.

“This principle works only if you allow enough time,” writes Blue, adding that the longer it works, the more it will benefit investors.

Be Disciplined in Money Matters

Discipline is crucial in money management. Start with saving early and regularly. Pick up some household budgeting tips to make sure there is money to spend and to save. When there is a decent amount to put into investments, resist greed and impatience, warns Blue.

He says that people invest in shares, bonds and managed funds because the value of the investment goes up over time, usually faster than inflation. However, many make the mistake of expecting a big return too soon, especially when they see friends and families making a lot more money in short periods of time.

Greed and impatience often step in here, causing many investors to abandon their well-thought financial strategies. Avoid doing that. Those who really want to be become financially secure need to remain disciplined and follow strategies that were already planned for their families, not listening to somebody else’s hot tips to get rich quickly.

Have Knowledge on Tax, Insurance and Investments

Tax-related matters often seem confusing to many people. But ample knowledge on tax will save the family a lot of trouble. Know the tax breaks and make use of them. Find out what the best tax deduction is for the family. See how income splitting can allow couples to enjoy lower income tax rates.

There should also be adequate insurance for the family. Adequate life insurance, income protection insurance and private health insurance are crucial, especially for families with young children and other dependents.

Before investing, do thorough research on prospective investments, if possible through a registered financial planner. Expect six to12 months before making the first investments. Also, learn to recognize financial cycles – a continuous process that can change suddenly, for better or for worse.

Device Firm yet Flexible Financial Strategies

Building financial security and wealth also requires firm strategies that can be revised when there is real need for it, Blue points out.

He says, “Educating yourself about money should be the core of your strategy. You might start with the finance pages of the daily newspaper.” Financial magazines, financial programs on TV and analyst reports are good sources of reference too.

Financial security is something attainable for every family. To make it happen, allow time to build wealth and be disciplined about saving money and sticking to a well-planned financial strategy. Families should also educate themselves about tax, insurance and investments as well as read up as much as they can about money and finance.

Mortgage Insurance – Useful Tips Before Buying: Help for Buyers of Mortgage Payment Protection Insurance or MPPI

The following is a guest post from Houston, Texas real estate developer and entrepreneur Tracy Suttles.

Mortgage insurance or MPPI normally pays out after a period of 30 to 60 days, thus ensuring that mortgage payments can be made. Mortgage income protection insurance helps prevent debt problems and can stop repossession.

Trawl the Market for the Best Mortgage Insurance Quote

Most people buy their mortgage insurance directly from their bank. The purchase is normally made at the time of getting the remortgage. Money Week Editor-in-chief Merryn Somerset Webb stated that The High Street banks charge up to five times as much in premiums as the few independent providers.”

Using an online mortgage payment protection insurance price checker ensures that the market is trawled for the best price. Alternatively, consult an independent financial advisor (IFA) as they can fulfil the same function, as well as advising on the small print of any policy.

Use MPPI to Cover More than Simply the Mortgage Payments

Whilst paying the mortgage is the main priority, help will still be needed with other bills. It is still necessary to pay for council tax, food etc. Most mortgage lenders will only quote sufficient insurance to cover what is owed to them. Don’t fall into this trap.

Don’t Waste Money on Mortgage Insurance when in Casual Employment

Taking out mortgage payment protection insurance may provide peace of mind when doing seasonal work, but it won’t provide any mortgage cover. The T&Cs of the MPPI policy will seek to exclude cover. It’s pointless taking out mortgage cover in this instance so don’t waste money doing so.

Cheap Mortgage Insurance Isn’t Always the Best

Whilst it is always advisable to trawl the market for the best priced mortgage insurance, don’t be fooled into thinking that cheapest is always the best. Read through the T&Cs to make sure that cover is provided where it is needed.

Time Needed to Elapse before a Mortgage Payment Protection Insurance Claim

All policies tend to pay out within 60 days, but there are many superior policies that will provide help with mortgage payments after 30 days. If the price of mortgage insurance is cheaper, it is quite probable that the deferred period before receiving help with mortgage payments is greater.

Mortgage insurance is the right move as it helps with mortgage payments during times of personal adversity. Always read through the T&C’s before signing up. If debt problems and mortgage arrears present a problem, consult a qualified debt counsellor to identify an appropriate debt solution.

Always remember that mortgage insurance is only one of a number of potential protection policies. Those with young families or mortgages should also consider a life insurance policy, critical illness cover and payment protection insurance.