5 Things You Need To Consider Before Filing For Bankruptcy

For people or businesses who are struggling to manage their debt, filing for bankruptcy is the last solution. Bankruptcy is not a solution to financial problems, but rather, it’s a way for debtors to reorganize their financial obligations. If you’re having a hard time managing your finances because of your debts, filing for bankruptcy could be one of your options. But before you talk to a bankruptcy lawyer, you must understand that filing for bankruptcy is an extremely complicated process and requires a great deal of planning.

Since bankruptcy is considered a last resort in managing finances, here are five things you need to consider before filing:

  • Type Of Bankruptcy 

There are two types of personal bankruptcy:

  • Chapter 7 Bankruptcy – Liquidates your assets so you can pay your debts. In this type of filing, you can keep part of your home equity, vehicle, personal items that have value, pensions, social security, and other benefits. The assets included in the liquidation are properties other than your current residence, recreational vehicles, investment accounts, and bank accounts. The court will sell off all of your non-exempt assets by a trustee, and the proceeds will be distributed among your creditors. By the end of the process, most of your debts should be discharged.
  • Chapter 13 Bankruptcy – In this type, you’re allowed to keep your assets, but you must agree to repay your debts over a specified period between three to five years. The trustee assigned by the court will collect your payments and distribute them to your creditors. Filing for chapter 13 bankruptcy helps you avoid foreclosure of your residence and payment of loans you cannot discharge like student loans.

Choosing which type of bankruptcy to file is not your decision alone. Some courts impose a means to test to determine whether you’re eligible for Chapter 7. In this test, they’ll evaluate your average income over the last six months and the median income for a household of your size in your state.

  • Your Debts

Before you can file for bankruptcy, you need to have a complete list of your debts. Your debt can generally fall into two categories:

  • Secured debts: These are loans backed up by collateral. In these cases, your creditor is legally allowed to seize and sell the asset agreed upon to repay the debt owed. Common examples are mortgages and car loans.
  • Unsecured debts: Loans that don’t have any collateral or security interest. Common examples are credit card debts and medical bills.

When evaluating your debts, the court will consider secured debts to be of higher priority because your creditor is allowed to claim your collateral when you fail to pay.

  • Other Alternatives 

As mentioned earlier, filing for bankruptcy is a complex and tedious process. It should only be your last resort, after seriously consider alternatives to bankruptcy. Often, even if it feels impossible, your debts can be managed without having to file for bankruptcy. Here are some useful alternatives:

  • Debt Counseling: Some companies offer debt counselling and management plans. A debt management plan is where you make regular payments to one designated company, and they pay your creditor on your behalf. Many companies offer lower interest rates and waive fees if you agree to debt counseling.
  • Liquidate Your Assets: For many people with significant debt, liquidating their assets to make repayments is the best option. Gather all items and accounts that have value like cars, properties, stocks or bonds.
  • Make Lifestyle Changes: To pay off your debt, you may need to make lifestyle changes. Small sacrifices like not spending too much on your wants, preparing meals at home rather than going out, and avoiding situations where you’re tempted to spend impulsively can go a long way.

If the alternatives have all been considered and ruled out, then it may be time to speak to a lawyer.

  • Plan To Rebuild Your Credit

Filing for bankruptcy will have implications for years to come. When you file for bankruptcy, this will be noted on your credit report for seven to ten years, making it difficult to file for additional credit or loans in the future. However, if your file shows you’re using your credit responsibly and attempting to rebuild your finances, many creditors will take this into consideration.

  • Understand Bankruptcy Comes With Costs

You’ll need to consult with a lawyer to file for bankruptcy. Some charge a flat fee based on how much debt you have, while others will invoice you a set hourly rate based on the amount of work they do on your case. You’ll be required to pay your lawyers even if you’re low on money. If you file for Chapter 7, you may spend an average of USD$1,000 to USD$1,200. The legal costs of filing for Chapter 13 are typically higher because payments are spaced out over several years.

Summary

Having a sizeable debt not only causes financial strain but can have mental, emotional and physical implications as well. For some, filing for bankruptcy is the ultimate solution to their debt problems, but for others it’s unnecessary. Before you think of filing for bankruptcy, make sure that you’re prepared to face the procedures and complexities of the process. You must be ready to let go of certain assets and make lifestyle changes to help manage your situation.

 

5 Things You Need to Know About Stock Futures

Investing in stock futures can be highly profitable, but it can come with some risk, too. Here are some things you need to know about stock futures so you can get started taking advantage of the market.

What Are Stock Futures?

Image via Pixabay by Dede

Stock futures are contracts that traders and investors purchase that obligate them to supply or take delivery of a tangible asset in the future. Stock futures or futures contracts allow investors to buy and sell these commodities and assets for a specific price on a certain day in the future. No matter which direction the stock market futures move, the buyer and seller agree to the price and date they set.

Pros and Cons of Stock Futures

One beneficial aspect of trading futures contracts is the ability to speculate on price changes. This means assessing the future direction in the prices of the assets you trade. Secondly, you can hedge your investments to protect against downward trends in price direction. Another benefit of investing in futures contracts is the cost. Typically, you’ll only need to put down a fraction of the entire price of the stock. This margin usually falls somewhere between 2% to 12% of the stock’s purchasing price.

The risk involved is one of the drawbacks of trading stock futures because you can risk losing more than you invested for the initial margin. Another drawback to futures is the volatility of the futures market, where significant drops in the direction of stock prices could mean missing out on selling at favorable prices.

Trading Futures Contracts

Start with an online trading platform where you can find an experienced broker to help you get started. Then, practice speculating and hedging futures in a trading simulator. As you learn the operations, you can start making real trades. You’ll need a brokerage account where you can make regular deposits to put down as your margins. Then, it’s all about watching the market’s performance and gauging your position.

How Are Stock Futures Regulated?

The Commodity Futures Trading Commission (CFTC) regulates the futures markets to ensure the integrity of pricing in these markets. CFTC’s regulation also includes the prevention and protection against abusive and fraudulent trading practices and monitoring brokerage firms that engage in stock futures trading.

Example of Calculating Stock Futures Prices

Use the formula below to calculate the future expected price of the stock futures you’re trading:

Expected value = (your next yearly dividend)/(return – growth rate). Here’s an example of how this would work:

Assume stocks from a company have a current yearly dividend of $5. The company has increased its dividends at a rate of 7% per year, meaning your next yearly dividend will be $5.35, with a total average return rate of 10%. Use these values in the formula:

Expected value = ($5.35)/(0.10 – 0.07)

With these numbers, the expected value of the stock will be about $178.33. This means that $178 should be the maximum price you pay for the stock if you expect a 10% return. This is important data to have because it can help you find more profitable choices.

Ultimately, futures trading can highly beneficial for diversifying your portfolio and making some passive income. Get started in futures trading with the right tools for success.