Filing for bankruptcy is a humbling experience, but it’s one that can save your business if you do it right.
If you’re insolvent and can’t pay bills as they come, if a bank is moving against your assets and if you feel you don’t have time to mitigate such problems, consider filing for bankruptcy.
Chapter 11 bankruptcy provides the protection of reorganizing a business while running it. (Individuals file for bankruptcy under Chapter 13.) Chapter 7 bankruptcy, on the other hand, usually means a business is over—it closes its locations and a trustee takes over the business to liquidate its assets through an auction. Filing under Chapter 11 and/or Chapter 13 can provide you with protection necessary to push the restart button on your business and give it a fresh start.
Before you file for bankruptcy protection, consider the following advice from Nat Wasserstein, owner of Lindenwood Associated LLC, a business crisis management firm in Upper Nyack, New York:
Restructure Out of Court
Before filing for bankruptcy, do what you can to restructure your business outside of court to prevent filing. Talk to your lender. You may be able to refinance or modify your loan or to arrange a forbearance agreement, or a contract that obligates the lender to temporarily refrain from enforcing existing and anticipated defaults and from going after the borrower’s assets.
If you owe money to vendors, explain your situation and try to arrange a payment plan. Before you meet with them, do your homework. Determine how much you’ve paid them over the years you’ve done business with them. Tell them, for example, that you paid them $1.5 million over the last 20 years, and they may never see the $60,000 you owe them if your company files for bankruptcy. “Once they see the downside is huge, they’ll be willing to negotiate,” Wasserstein says.
Consider Cost and Risks
Bankruptcy is expensive. In addition to a filing fee, you’ll also have to pay lawyers’ fees—and that could be as much as $50,000 to $150,000, Wasserstein says. And don’t forget that filing for bankruptcy means you may lose business and compromise relationships with customers, suppliers and vendors. Suppliers might not want to agree your terms. Customers might not want to do business with a company that could shut its doors in the near future, or buy products that have a warranty that may not be good down the road.
Make sure you have as much cash on hand as possible before filing for bankruptcy. “You don’t want to run into a situation where you’re administratively insolvent,” Wasserstein says, meaning you can’t pay for bankruptcy.
Consider Personal Bankruptcy Protection
If your home, taxes and personal finances are being deeply affected, you might want to consider filing for personal bankruptcy protection under Chapter 13 (in addition to Chapter 7 or Chapter 11 bankruptcy) to protect your assets. Many SBA loans, for example, have a personal guarantee that allows lenders to go after the business owner’s home and other assets in the event of insolvency. Chapter 13 can prevent lenders from acting against you
Consider Hiring a Credit Clearing Company
Nationwide Credit is in the business of helping consumers correct their credit reports and raise their Fico scores. Experts at Nationwide Credit will review the customer’s credit report and challenge any information that is incorrectly reported, outdated or unverifiable. This process is accomplished under the laws of the Fair Credit Reporting Act.
Nationwide Credit is registered with the Illinois Secretary of State and holds a surety bond with the State of Illinois Credit Services Organization for $100,000 (bond #70886942).
Nationwide Credit is well known in the mortgage lending business as a top credit counseling agency in the country. We work along with our mutual clients and the mortgage lender to assist in the process of addressing credit report and Fico score issues.
Nationwide Credit Repair’s CEO has been featured on “Fox Thing in the Morning” on Channel 32, and is also the host of one of the most popular public access cable shows in Chicago, “Credit Talk.”.
Our ads can be seen in a number of newspapers throughout the country and heard on the radio. Nationwide Credit also receives hundreds of referrals from satisfied customers and other businesses.
Our number one goal at Nationwide Credit is to help consumers achieve their dreams, and by using the power of Nationwide Credit, it’s possible for those dreams to come true. That is why we’re considered a top credit counseling agency in the country.
Credit Report Scores are often used by lenders as a predictor of how likely you are to pay your loans.
A credit score is generated by a mathematical formula utilizing the data from your Trans Union , Equifax, or Experian Credit Reports. Lenders have been using credit report scores as part of lending decisions for more than 20 years.
So you got a couple of credit cards, used them a bit too much and now you need to settle your credit card debt. This is the situation that many people find themselves in. You do have options so don’t let anybody tell you different. One of those options is debt negotiation, also known as debt settlement.
First is what debt settlement company to use.
This is the most important decision you will make because debt settlement companies are everywhere. There are many to choose from but not all of them have YOUR best interest at heart. The reality is that some only care about taking your money. Settling your debt takes a back seat.
A reputable company will tell you up front what the possibilities are and will represent your interests with integrity. Before any papers are signed, the costs and associated risks should be laid out. Do a little research and find companies with good consumer reports. The Better Business Bureau is a good place to look for unresolved complaints. A lot of unresolved complaints or reports are a big red flag.
Second, consider your possible tax liability.
This is a common scare tactic used to turn potential clients away. While there is a possibility of a tax liability resulting from credit card debt settlement, it isn’t likely. Creditors must report all canceled debt over $600 to the Internal Revenue Service on a 1099 form. The IRS views canceled credit card debt as taxable income and you have to claim it on your next tax return.
The IRS offers an exception called insolvency. Insolvency is when what you owe exceeds what you own and your tax burden is removed entirely. More than 95% of people using a debt settlement solution are insolvent. After all you’re already in trouble financially so insolvency is all but guaranteed and your tax liability is wiped out.
Also consider the impact on your credit report.
This is another scare tactic that so called “experts” will spew. If you have credit card debt and are considering a debt settlement solution, your FICO score or credit rating is the last thing you should think about. Speaking honestly, when you are having trouble with the minimum credit card payments, it can and will affect your physical health, cause you to lose sleep and affect your nerves. Since you are behind in payments and probably delinquent, your credit rating is already affected negatively.
Credit card debt settlement stops the calls, stops your fretting and gives peace of mind. Most times, balances are decreased by as much as 50% of the original amount owed. More importantly, they are being paid down now. When your credit card balances are paid off, the debt settlement company requires the creditor to mark your account as “paid in full” or “satisfied” on all of the credit reports. So the negative credit effect is only temporary.
Within a few months of satisfying the settlement, your credit score will begin to rise again. Credit card debt settlement does not lower your credit score, being delinquent does. Paying those bills off reflects positively on you.
Mortgage rates continuing to trend higher amid a growing economy led in part by the recovering housing market. This marks the first week the 30-year fixed-rate mortgage has averaged above 3.5 percent since September 13th of last year.
1. 30-year fixed-rate mortgage (FRM) averaged 3.53 percent with an average 0.7 point for the week ending January 31, 2013, up from last week when it averaged 3.42 percent. Last year at this time, the 30-year FRM averaged 3.87 percent.
2. 15-year FRM this week averaged 2.81 percent with an average 0.7 point, up from last week when it averaged 2.71 percent. A year ago at this time, the 15-year FRM averaged 3.14 percent.
3. 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.70 percent this week with an average 0.6 point, up from last week when it averaged 2.67 percent. A year ago, the 5-year ARM averaged 2.80 percent.
4. 1-year Treasury-indexed ARM averaged 2.59 percent this week with an average 0.5 point, up from last week when it averaged 2.57 percent. At this time last year, the 1-year ARM averaged 2.76 percent.
“Mortgage rates continued to trend upwards this week amid a growing economy led in part by the recovering housing market. For instance, new home sales totaled 367,000 in 2012, the most in three years and reflected the first annual increase in seven years. Pending home sales in 2012 averaged its highest reading since 2006.
All of these factors helped residential fixed investment to add nearly 0.4 percentage points to real GDP growth in the fourth quarter alone.”
Nationwide Credit Clearing | 2336 N. Damen, First Floor | Chicago, IL 60647 | 773.862.7700
Celebrities of all sorts have attached their names to pre-paid cards pushing the industry into the spotlight. But just because Lil Wayne, Justin Bieber and other big-names are endorsing these cards, that doesn’t make them the right fit for all consumers.
As of September 2011, prepaid cards have become the fastest growing payment type, according to the Federal Reserve. These cards offer perks the purchase perks of debit and credit cards but there is no application process to open an account and there is no danger of overdrawing the account and landing in piles of debt.
Personal finance experts say prepaid cards are great for young people, particularly college students, who are just starting to learn about fiscal responsibility and for consumers who want to get better control of their spending and avoid overdraft charges.
Many prepaid cards firms promote them as a viable alternatives for people who don’t have – or can’t have – bank accounts, a number the FDIC estimates at nine million people.
The Mercator Advisory Group reports that nationwide, transactions on pre-paid cards rose to $71 billion in 2011 from $2.7 billion in 2005. And analysts expect that amount to more than double this year and soar to $201 billion in 2013.
Prepaid Debit Cards: Big Business
The surge in popularity of these cards is probably one of the reasons why retail giant Wal-mart teamed up with American Express in October to offer a pre-paid card.
The two companies unveiled a new card known as Bluebird that gives customers access to perks typically reserved for credit card holders such as roadside assistance, customer service and mobile banking. The two companies tout the prepaid debit card as a sensible option for consumers frustrated by bank fees.
Both companies say Bluebird will have no minimum balance requirement and no monthly or annual fees, traits that are standard for most pre-paid cards. Each out-of-network ATM withdrawal will cost $2 as will each withdrawal without direct deposit.
In an economic climate where banks and credit card issuers have tightened their lending standards and consumers are cutting their spending to beef up savings, many are turning prepaid debit cards.
However, there are a few things to consider before signing up for a prepaid debit card, especially if you have other options, including credit cards and checking accounts:
- Many companies that issue prepaid debit cards add on fees that could sometimes run into hundreds of dollars a year.
- Prepaid cards don’t build credit with the three major credit bureaus. Unlike certain debt obligations like credit cards, car loans, mortgages and even rent, there is no debt involved with prepaid cards.
- Most prepaid cards also offer little or no protection to users. While banks and credit card companies are legally obligated to cover most losses in cases of fraud or theft, prepaid card companies do.
- Prepaid cards don’t offer a reward system. You don’t earn points or other incentives that might result in cash back or frequent flyer miles
Debt settlement is not an option to take lightly, but could be considered in certain situations.
hen you can’t pay your bills and don’t expect to be able to do so any time soon, settling the debt — working out an agreement with the lender to pay a reduced balance or structure a payment plan — may be an option worth considering. Though it’s nothing they shout about, banks routinely wipe debt balances from their books, including consumer loans.
Debt settlement isn’t an action to take lightly. A settlement shows up on your credit report as a black mark that lingers for seven years and can influence your ability to obtain new credit or a loan, and at what rate. It might be too drastic a move for consumers who could dig out with a tighter budget. Settling might not be drastic enough, on the other hand, for consumers in very bad financial shape and few assets. Filing for bankruptcy protection is also an option.
Explore alternate avenues. Before settling on a settlement, make sure you’ve exhausted other ways to make paying off debts more manageable.
- Control finances. Use free tools like Mint.com or Billshrink.com to see if you might be able to squeeze any extra cash out of your budget.
- Earn more. Easier said than done, but possible. Consider taking on a part-time job – Snagajob.com lists hourly gigs — or pulling in more cash by selling un-needed household goods on eBay.
- Consult a counselor. A debt-management counselor can help you arrange payment plans with creditors, for free or a small fee. They can also help you decide whether bankruptcy or debt settlement is the better option for a dire financial situation. Use the Federal Trade Commission’s guide to find a reputable firm near you.
Build your case. You can work directly with your lender or debt collection agency to reach a settlement, which means there’s no need to pay a third-party company exorbitant fees to arrange one for you. But you must prepare before calling to negotiate.
- Gather financial documents. Securing a settlement requires showing that you can’t pay the full amount owed. Make a list of living expenses, income and debt obligations.
- Show life changes. Be prepared to talk about what has changed with your financial situation since you first took the loan or opened the credit card — loss of a job, for example, or medical troubles. Have documentation on hand to support your case.
- Save settlement offers. Lenders often mail or call with settlement offers. Obtaining a deal is usually as simple as calling to say you’d like to accept it. The Federal Trade Commission (FTC) offers guidelines to handle debt collectors while you’re figuring out what to do.
Strategize settlements. With limited repayment resources, which creditors you settle with and when can have a big impact on how you fare.
- Start with your least manageable debt. Creditors want to be first in line to settle, because it increases their chances of getting paid at all. Reach out to the lender whose debt carries the least-affordable terms — either the biggest monthly payment or the highest interest rate.
- Focus on payments. Settlements typically require a lump-sum payment for the balance owed shortly after you finalize terms. Don’t settle for an amount that you can’t afford to pay off quickly.Use our calculator to figure out the cost of various debts.
- Consider the tax implications. If more than $600 in debt is forgiven, that amount may be considered “income” taxable at your regular rate. The IRS will send you a Form 1099-C in the mail for inclusion with next year’s return. Factor that bill in when deciding whether or not to settle.
- Call A Credit Clearing Company to Help. Nationwide Credit Clearing We professionally assess your individual credit situation by procuring some basic information that allows us to obtain a copy of your current credit report via “soft inquiry” so that it doesn’t affect your credit score(s). Our staff of consummate professionals will review the information we see and determine the best method of credit clearing to utilize on your case. Our vast number of years of experience in working on your deletions allows us to understand each step to take for the most advantageous results. Once you become our client, we begin the disputing process immediately. Your benefit is that we handle the “entire” credit dispute process professionally and in an expedient manner for all three (3) bureaus. Call us today for more information. 773-862-7700
Stay up to date with available tax credits and deductions
Whether you are filing a tax return for the first time or have been filing for decades, it’s important to understand that tax laws change from one year to the next. Keeping up with current tax laws can help you take advantage of available credits and deductions, while also avoiding possible penalties. Here are some of the biggest updates for the 2012 tax year.
- Single or Married Filing Separately: $5,950 (up $150)
- Head of Household: $8,700 (up $200)
- Married Filing Jointly and Qualifying Widow(er)s: $11,900 (up $300)
- No children: Credit of $475; if income is below $13,980 or $19,190 (married filing jointly)
- One child: Credit of $3,169; if income is below $36,920 or $42,130 (married filing jointly)
- Two children: Credit of $5,236; if income is below $41,952 or $47,162 (married filing jointly)
- Three or more children: Credit of $5,891; if income is below $45,060 or $50,270 (married filing jointly)
Collection accounts will appear if you choose to stop payments on an account or a debt. The lender in charge of the account may sell your account to a collection agency, turning the account into a collection account. These collection agencies will convince a customer to pay their debt. They will do this by reporting the collection account to the three credit bureaus, impacting your credit report and credit score.
If a collection account appears on your credit report or you receive something informing you of a collection, it is important to know who owns the debt. DO NOT pay anything until you know who the money is supposed to go to. Request information for the agency that owns your debt, the history and how much you owe.
Like most other accounts on your credit report, a collection account will not come off your report when it is paid. It can stay on your report for up to seven years. It is important to begin to pay off the debt. Talk to the company who owns the debt to come up with a payment system. Once you begin to pay off the debt, Nationwide Credit Clearing can begin to challenge the collection on your report to the three credit bureaus. Once the debt is paid off, there is no need for it to remain on your report and affect your credit score. Get the collection account removed today!
Nationwide Credit Clearing is reaching out to our friends, family, and clients to help us support our troops. For every person to call for a FREE credit report consultation, Nationwide Credit Clearing will donate a box of Girl Scout cookies to our armed forces. There is no cost to receive a credit report consultation, so tell a friend to call us today at
773-862-7700 or visit our WEBSITE