Bankruptcy

First, let me say this is for informational purposes only and you should seek legal advice.  Okay, with that out of the way, there are different types of bankruptcies an individual could file.  Understand once you start the process and it is sent to the courts you no longer have any control of the process, meaning you will not be able to stop it.  The decision will be up to the court at that point.  You give the courts and your creditors the right to make you sell off your possessions in order to pay your debt obligations and potentially seize your income tax, if you file after the bankruptcy and receive a return.  That is a reason for some of the estate sales you see. A lawyer can give you the specifics, but this is the basic of what can transpire during a bankruptcy.  The courts will say what is allowed or disallowed.  Due to the new rules there are financial requirements for either filing and how often you can file, so you only want to use this when necessary.  

Filing Chapter 7 has the power to relieve you of all the debt you have listed.  You may be allowed to keep your car, home, and other items as long as they are not more than what you are exempt for.  A Chapter 7 will usually last about four to six months prior to being discharged.  A Chapter 13 is the reorganization of debt, meaning you will be responsible to make payments toward the debt and it can be up to three to five years to be discharged.  Generally unsecured creditors will receive a lesser amount than what is actually owed.

If you keep your home or car you will have to continue to pay the note or the creditor can request a relief of stay and have it included in the bankruptcy.  Bankruptcy will only protect your home if you continue to pay the mortgage, due to it only places the arrears under the payment arrangement.  If you are not paying the front end of your mortgage then you will continue to fall behind.  So, understand a chapter 13 will only help you keep your home if you can pay your current mortgage.  It will only buy you time to get things figured out or replace your income, if you are not able to pay them both simultaneously.  Lenders will not be able to negotiate with you concerning a debt until you have been discharged.  That is the reason the bank will not speak with you during a bankruptcy or review your file until you have been discharged or dismissed.  The same rules apply for your vehicle as well.  The trustee will be responsible for setting the amount for repayment in the Chapter 13 plan and the length of time for the repayment period.  

It doesn't matter which one you file, they are reflected the same way on your credit report.  It will remain on your credit report for 10 years.  It will be up to the lenders if they will consider you made arrangements to pay your debtors, but you will still have the scar.  You want to only file bankruptcy when there is nothing more you can do and speak with a bankruptcy attorney for your best option.  Remember to do your homework as well, so you have some thoughts about the process so it doesn't seem so foreign to you.  The good news is once your case has been discharged your creditors listed can no longer contact you concerning the debt.  But if your file is dismissed then there is an issue which needs to be addressed or you didn't make the scheduled payments to the trustee.  Either reason puts you bank on their radar.  I hope this provided a snap shot for this process and helps your toward the best financial decision for you and your family. 

College Graduate

So, you are about to graduate or you have recently graduated and now you need to understand what you agreed to when you signed for your student loans.  The first thing you must understand is that you must pay back your student loans at some given point in time, so I hope you only borrowed what you needed.  Outside of that, there are several loans for which you can borrower against and you must know which ones you have in order to know how the interest in incurred and when you will need to start repayment.  Review your outstanding loans and the current interest rate and if it is fixed or variable.  You could either have a government loan or a private loan.

The government loans can be either subsidized or unsubsidized with a fixed rate depending on when the loan was awarded with a six month grace period after graduation.  The subsidized loan is needs based and will not accrue inter while you are in college or during the six month grace period after you graduate.  The unsubsidized loan is not based on financial needs and you will be responsible for the interest that accrues on the loan while you are in school and during the grace period after graduation.  You can qualify for either loan when you complete your FAFSA paperwork.  The subsidized loan amount will be determined by the college you will be attending.  The Perkins loan is also a governments needs based loan, but it is for students with extreme financial needs.  The interest rates are lower and have a nine month grace period instead of the six month, there are also no fees involved.  If you were not able to qualify for a government loan you may have received a private loan.

A private loan would have been granted by a financial institution or by Sallie Mae.  Many loans are released through Sallie Mae.  If you received a private loan your rate is typically variable and you may or may not have a grace period after graduation.  You must read the terms of your agreement to repay your loan.  There are several repayment options to your loan whether you have a government or private loan, you will need to go directly to their website to see what they are. 

You will usually have at least six months after you graduate before you will have to restart paying back your student loan.  If you are unable to pay your loan by the six month or the last month you will need to contact the lender to see if you qualify for a deferment or forbearance.  If you are working, but not able to pay the requested payment you can request a forbearance.  A deferment is allowed for a period of specified time allowed by the lender, based on the reason for the request.  During this time you will not have to make a scheduled payment.  If you receive a forbearance you can either pay nothing during the time period or you can pay an adjusted amount for a specified period of time.  The main point is to not default on your student loan.  You may receive a forbearance while in default, but most lenders want you to enter a default program in order to be considered for any other special programs.  If you are delinquent, but not in default you can use the forbearance program to delay going into default.  You do not want to go into default due to they can request a judgement against you and garnish your wages, especially if it is a government loan. 

If you return to school your loans will go back into deferment until you graduate and the payments will resume.  Please do not be afraid to discuss your options with your lender by reviewing their site or speaking with a representative.  If you are late on your payment it will reflect negativity on your credit report, so be proactive.  The good news is there are ways to have the debt canceled.

You can request a cancellation of debt through bankruptcy, which is the most difficult way to do it, death, disability, or there is an issue with the school you attended and incurred the debt.  You can also request a cancellation of debt because of the profession you have selected.  There are several government jobs that will cancel a portion or all of your student loan debt, but requires your service for a specific period of time. You can learn more at http://www.studentloanborrowerassistance.org/loan-cancellation/.  If your debt is canceled and the amount is over $600 you will have to claim it as income on your tax return, but you will need to speak with a tax professional to advise you of how it will affect you individually.  The reason you will have to claim it as income is because you did receive the money for its intended purpose, but didn't have to lose money in paying it back.  So, in doing so you actually got to keep that money you would have spent and the government says that is income for you.  You will receive a 1099C informing you of the amount and tax period you will have to claim.

Following Gods Financial Plan

I believe there is a spiritual aspect to everything we do, especially in the way we handle our finances.  Not only in the paying of tithes and offerings, but in the way we handle our debts.  The bible is full of instruction on how to treat your creditor, but also how the creditor is to treat you.  You always hear advertisement directed toward the debtor to make you feel bad about yourself if you are not following the plan God has for you.  They never mention that God also has a plan for the creditor.  The prayer says. "Forgive us our debts as we forgive our debtors."  What I want you to understand is yes, as children of God we are suppose to be lenders and not borrowers, but lenders are not suppose to expect more than what they gave, You can find this in Leviticus 25:37.  We all know that is not the nature of how it works now, due to we have to pay interest on top of what we borrowed, unless you can pay during an interest free period.  The bible actually says they should forgive debt if you  are unable to pay back what you borrowed, as found in Matthew 18:27 . 

You must understand that God has given us all instructions to better ourselves and help our sister and brother grow.  As a person that owes another it is okay to ask for forgiveness of your debt, it doesn't make you a bad person or Christian.  It is simple using the prevision God has set for you.  It is however very important that you listen to counsel and stay in your financial field, as found in Proverbs 19:20.    If you are having financial difficulty it is your duty to seek assistance. We must get over the embarrassment of not being in the financial position we hoped we were in and deal with where we are.  I truly believe embarrassment is just a form of pride and we all know pride is one of the deadly sins.  When it comes to finance being prideful, it will must definitely leave you depleted.    I say that because you will not seek help when you are full of pride, even when you know you need the help.  It doesn't matter your level of education or status, if finance is not your area of expertise you just might need help in that area.  

This is one of my favorite verses says: Proverbs 13:7- There is one who pretends to be rich, but has nothing; Another pretends to be poor, but has great wealth.  I selected this one because it is the basis around the saying of trying to live like the Jones', when you really are a Smith. It is okay to be a Smith, live within your financial field or below it.  I am not trying to preach to you I just want you to understand you have the power and the means to change your financial status and get back on track.  I believe it is my duty to share with you what I have learned in order to help you prosper and grow and in return I will learn and grow with you.  Let us know what you think or what you are concerned about.