Basic Things You Need To Know About Bankruptcy

Filing for bankruptcy doesn’t necessarily mean the end of the world. Find out what it really means and how it can be used to get back on your feet, financially.

Meaning

We’ve read news about how this person or company has filed for bankruptcy, but what does that exactly mean? Bankruptcy is basically a legal status where a person or company is protected from all creditor action. A court will decide that this entity is no longer capable the debts he owes his creditors. The debtor often initiates the filing of this case.

Types of Bankruptcy

There are three types of bankruptcy: Chapter 7, Chapter 11 and Chapter 13.

Chapter 7 - also known as straight bankruptcy.  This status basically removes all credit card debts and other bills like medical and utility bills. It is considered as the simplest bankruptcy form available.

Chapter 11 – bankruptcy form often available to business entities where financial reorganization and rehabilitation still allow companies to function as they go through debt repayment plans. It is also known as corporate bankruptcy.

Chapter 13 – also known as the wage earner bankruptcy. This is basically a repayment plan for mortgage and credit card debt available for those individuals with a regular source of income.

What happens when someone files for bankruptcy?

This means that is a person or company has been having a hard time paying monthly bills, they can have a repayment plan drafted with their creditors and the creditors will have to accept and follow this. This means the harassment through phone calls and letters will stop and the mortgage company will not foreclose their property. Filing for bankruptcy doesn’t necessarily mean the end of the world. Basically one gets to keep his home, his car and his retirement funds. With diligent planning, one can get back on their feet within two years, yes even get back their former excellent credit rating.

What does one have to do to file bankruptcy?

A basic tip before filing for bankruptcy is consult with a lawyer. Sure, one can file on their own but this is not recommended. There have been changes in the law and some misinterpretations can be made by individuals not really familiar with it. Just gather copies of bills, mortgage statements and most recent tax returns. These will help the attorney have a basic idea of one’s financial condition and can plan where to go from there.

Mortgage Rates Are Negotiable

Better to read this first before availing of the first mortgage quote offered to you.

When you go into any financial institution and inquire whether mortgage rate are negotiable, most will shake their heads and probably say that mortgage prices or rates are fixed or firm. Don’t just take their word for it since this is not entirely true. Mortgage rates can always be adjusted in a number of ways. A good example of this is when you can negotiate to buy down your interest rate by paying mortgage discount points. Although technically you are still paying the prepaid interest upfront, is still shows that mortgage rates can be adjusted since this will in effect lower the cost for the loan duration.

Another way to negotiate the mortgage rates is to ask for multiple rate/cost combinations effective adjusting loan costs and mortgage rates.

Since the mortgage industry so competitive, it is actually better for the consumer to shop around for an institution that’s stable, reliable and willing to offer the best deal. Search for mortgage rates quotes online, talk to brokers and visit nearby banks. As you gather information about the various rates offered by different banks or brokers, you may also use this information as leverage to haggle or negotiate.

Tips for a First Time Home Buyer

Buying a home when you've got the cash for is great, but not too practical. People often go and get a home loan to purchase their homes. This way, money is not tied down to the property. Anyway, here are some tips to get you ready to buy your first home.

Check your Budget.

First things first, check what you can afford. Make sure that your credit background and records are in order because this is the first thing that the banks will look into when you are applying for a mortgage to finance your home. Banks and lenders consider a borrower’s debt to income ratio when deciding on whether to offer you a loan or not, and the corresponding amount. Make sure that piece of property is within your budget and income capacity.

Check your Credit

Obtain a credit report. There are websites out there that offer these services for free. Analyze the data gathered like your monthly expenditures and liabilities. Also make sure you don’t have any delinquent accounts and if you do, clean these up immediately. Any derogatory credit record is a point against you when applying for a mortgage.

Ensure your Housing History

It is also a big help for your better chances of loan approval if your 12-month housing history is down on record and can easily verified. This shows credibility and stability.

Shop for the Best Rates

Don’t apply to the first bank or lender you see. Shop around. Some institutions offer better rates than others. There are cases too when banks sweeten the deal by giving promotional items.

Now that you’ve got some idea on how to prepare for your first home purchase, start getting ready now. Who knows, by following these tips, you might afford yourself some savings, not to mention lessen the stress of buying a home through mortgage.


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