Month: March 2022

How bankruptcy can actually help your credit score

Filing for bankruptcy can have a significant impact on your credit score. In the short term, filing for bankruptcy may lower your credit score because it is viewed as a negative event by credit reporting agencies. However, in the long term, filing for bankruptcy can actually improve your credit score in several ways.

  1. Debt Elimination: Filing for bankruptcy allows you to eliminate or discharge your unsecured debts, such as credit card debt or medical bills. By doing so, you can reduce your debt-to-income ratio, which is an important factor in calculating your credit score. A lower debt-to-income ratio can lead to a higher credit score.

  2. Opportunity to Rebuild Credit: After you file for bankruptcy, you will have the opportunity to rebuild your credit. This can be done by making on-time payments on any remaining debts, such as a car loan or mortgage. Additionally, you may be able to obtain a secured credit card or other type of credit account to demonstrate that you are responsible with credit.

  3. Fresh Start: Filing for bankruptcy provides a fresh start, which can be beneficial for your credit score in the long run. By eliminating your debts, you can start to rebuild your credit without the burden of past due accounts or collections.

It is important to note that bankruptcy can remain on your credit report for up to 10 years, which may have a negative impact on your credit score during that time. However, it is possible to start rebuilding your credit immediately after filing for bankruptcy, and with responsible credit behavior, you can improve your credit score over time.

It is also important to understand that not all types of bankruptcy have the same impact on your credit score. Chapter 7 bankruptcy, for example, may have a more significant impact on your credit score than Chapter 13 bankruptcy. Additionally, the impact of bankruptcy on your credit score may vary depending on your individual circumstances, such as the amount of debt you have and your credit history.

Overall, while filing for bankruptcy can have a short-term negative impact on your credit score, it can also provide a long-term opportunity to eliminate debt and rebuild credit, which can ultimately lead to a higher credit score.

Waiting to file bankruptcy is a lose, lose situation.

Waiting to file for bankruptcy can be a tempting option, especially if you are hoping to improve your financial situation without taking the drastic step of filing for bankruptcy. However, waiting to file bankruptcy can actually be a bad idea in several ways.

  1. Continued Financial Stress: If you are struggling with debt, waiting to file for bankruptcy can prolong your financial stress. This can have a negative impact on your mental and physical health, as well as your relationships with family and friends.

  2. Missed Opportunities to Rebuild Credit: Filing for bankruptcy provides an opportunity to eliminate debt and rebuild your credit. By waiting to file, you may be missing out on this opportunity and prolonging the time it takes to rebuild your credit.

  3. Increased Debt: Waiting to file for bankruptcy can also lead to increased debt. As interest and late fees accrue, your debt may continue to grow, making it more difficult to pay off in the long run.

  4. Risk of Creditor Actions: If you are unable to pay your debts, your creditors may take legal action against you, such as garnishing your wages or seizing your assets. By waiting to file for bankruptcy, you are putting yourself at risk for these types of actions.

  5. Missed Opportunity for a Fresh Start: Filing for bankruptcy provides a fresh start and an opportunity to eliminate debt and start over. By waiting to file, you are prolonging the time it takes to achieve this fresh start and may be delaying your financial recovery.

It is important to note that filing for bankruptcy is a significant decision that should not be taken lightly. However, if you are struggling with debt, waiting to file may only make the situation worse. It is important to consult with a qualified bankruptcy attorney to discuss your options and determine whether filing for bankruptcy is the right choice for you.

Additionally, it is important to understand that there are some circumstances where waiting to file for bankruptcy may be beneficial. For example, if you are expecting a significant increase in income in the near future, it may be beneficial to wait to file for bankruptcy until you can pay off more of your debt. However, these situations are unique and should be discussed with a qualified bankruptcy attorney.

In summary, waiting to file for bankruptcy can be a bad idea because it can prolong financial stress, lead to increased debt, and put you at risk for creditor actions. Additionally, waiting to file may cause you to miss out on opportunities to rebuild your credit and achieve a fresh start. If you are struggling with debt, it is important to consult with a qualified bankruptcy attorney to discuss your options and determine the best course of action for your individual circumstances.

Beyond your Will: A Letter of Instruction

Letter of Instruction

Many people view their will as the final document they need in life.  From a legal perspective, that’s true.  One of the most often overlooked things you can do and leave behind for your loved ones is a letter of instruction. 

The letter of Instruction

A letter of instruction is not a legally binding document.  It’s informal and meant to provide those you’ve left behind important information about any personal and financial matters that need to be addressed.  

The letter of instruction should be easy to change and update and address several common concerns of those left behind.  

Important documents and financial papers

First things first.  You need to tell everyone where you will is in the letter.  You’ll also want to disclose where your power of attorney documents, living wills and medical directives.  Also, leave birth certificates, info in SSI benefits, any marriage licenses that may be applicable and if necessary, divorce documents. 

Next,  you’ll want to list all of your assets and their locations.  If you have a financial advisor, they should have these items for your loved ones.  If not, leave bank account numbers, investment account numbers and locations, info on retirement accounts like 403b, IRA or 401k accounts. You’ll also want to list any health insurance plans you have, information on your business if you’re self employed, info on any life insurance or disability policies and if you’re a veteran, leave information pertaining to your service and any benefits that come in because of that service. 

Finally, list all of your liabilities, especially ones your family may not know about.  The last thing you want is for your family to get dragged into litigation or get hit with surprise bills. 

Final Arrangements 

The letter should also include details about your desired funeral arrangements.  How do you wish to have your body disposed of? Burial, cremation, composting (apparently that’s a thing), shot off in a rocket? Your family needs to know.  Also, what kind of service do you want? Who do you want to preside over it? Is there any special music you’d like played? Where do you even want the service to be?

Additionally, make a list of anyone you would want notified of your passing and include contact information if possible.  If you would rather people donate in your memory list that as well, along with those charities you’d prefer. 

Passwords and Digital Information

Almost everyone has an online presence now.  It’s important for your family to know where you have accounts and what you want done with them.  Leave user names, passwords and any other information you’ll likely need to access your online life.  Also, leave instructions for social media pages and how you wish for them to be handled after you’re gone.  

Personal items

One of the biggest points of contention that occur after someone’s death is the disposal of small personal items.  Do you want your niece to get your China set? What about your silver?  Do you want to leave your wedding ring to your daughter or son? What about other sentimental items that have little monetary value but mean the world to people?  Our recommendation is to always pass these items along before you pass, it allows you to see the person you love enjoy the item and it keeps quarrels down after you’ve gone.  However, should you choose not to pass it along before you pass, make sure to leave a mention as to who should get what when the time comes.  

Last but not least

A Letter of Instruction can offer you and your family peace and guidance during a difficult time.  It’s hard to write such a letter but your family will thank you if you do.  I know when my own grandmother passed, having this type of letter made dealing with the emotions of the time so much easier on everyone involved.  

Once you get started, you may find that the letter writes itself, but take the step and get started.  If you’re not sure about the status of your estate, give us a call and let us walk you through the process of creating an estate planning package.  Our estate planning package will give you and your family peace and comfort during difficult times and make your final wishes known.