The term intellectual property (IP) often comes up, especially in terms of well-known brands and products, but what exactly is it? Intellectual property covers ideas, innovations, and inventions created by a person or a group of people (can also be anything from a company to small business). [Read more…]
How Long Does Bankruptcy Stay on Credit Report?
Filing for bankruptcy is a tough decision to make. It can provide relief when you’re drowning in debt, but it does have consequences when it comes to your credit. How long does bankruptcy stay on your credit report?
We’re going to explore the answer to that question, as well as a few other items, in this article.
What is bankruptcy?
It’s a legal proceeding when an individual or an entity is relieved from some or all of their debts. Whether it’s all or some, and how that process takes place depends on the type of bankruptcy that’s filed.
- Chapter 7 – Liquidable assets are sold in order to pay off debts. When those assets are exhausted, the remaining debt is discharged.
- Chapter 11 – The most expensive option, which is usually used by companies (General Motors and J.C. Penny, for example). This is a reorganization plan that enables companies to remain open while getting their financial obligations situated.
- Chapter 13 – Only available to individuals. The person filing implements a payment plan and is typically able to keep their assets (house, car, etc.). The debt must be paid off in 3 to 5 years.
Federal student loans are often excluded from being discharged, so you’ll be on the hook for that.
Let’s take a look at how bankruptcy affects your credit report.
How it affects credit
I’ll state the obvious by telling you that bankruptcy negatively affects your credit. Typically, you can expect your score to drop by 20-25%. This also depends on your current credit score and credit strength.
Discharges on more accounts and/or accounts with higher balances will affect your score more than discharges on a small number of accounts and/or low balances.
Delinquency usually proceeds bankruptcy and those stay on your report for 7 years. Chapter 7 bankruptcy stays on your credit report for 10 years, while chapter 13 stays on for 7 years.
What to do after
Inspect your credit report with a fine-toothed comb. Make sure that the debts discharged were actually discharged. If you find errors, go through the proper channels to get those corrected.
Once you’ve filed, you can immediately start building your credit back up. The first step is to ALWAYS pay your bills on time. I’ve stated before that on-time payment history is the number one factor when calculating your credit score.
The next step is to open a credit account. This should be something small and manageable. I often suggest a secured credit card. With this type of account, you make a deposit and that deposit acts as your credit limit.
Establish a positive payment history and keep your utilization well below 30%.
Bankruptcy on your report
You don’t have to do anything to remove the bankruptcy from your credit report. It will fall off on its own.
Review your credit report once the 7 or 10 year period ends. At that point, depending which type you filed, the bankruptcy should come off.
Give it a few months as your credit report often lags a little after the activity actually took place.
Stay diligent. Bankruptcy is not a death sentence, it’s a fresh start. Pay on time, keep your utilization low, and keep your spending in check.
Related reading:
How to Answer a Civil Summons for a Credit Card
What You Need to Know About Bankruptcy
What Affects Your Credit Score
My name is Jacob Sensiba and I am a Financial Advisor. My areas of expertise include, but are not limited to, retirement planning, budgets, and wealth management. Please feel free to contact me at: jacob@crgfinancialservices.com
The Importance of Being Handy
Perhaps it is just within my circle, but it seems that the character trait or the skill of being handy has lost its value.
People seem unable to fix simple things. Around their house, their car, what have you.
I’m curious if the majority of people know the difference between a Phillips head screwdriver and a flathead screwdriver.
At no time was the importance of being handy more clear than during the last few months, when the entire country went into lockdown. You never know when that service you rely on will be unable to help you.
My Experience
My dad taught me from an early age the importance of being able to fix things yourself and the value of a strong work ethic. Those may seem unrelated, but I believe they are directly correlated.
I watched him and helped him with all of his projects. Plumbing, changing the oil on his car, renovations, replacing his brakes, you name it.
Not only did it save him and us, as a family, money, but it was quality time I got to spend with him. There were valuable lessons taught in those experiences.
Now, I can fix almost anything. It gives me a sense of pride, it saves me money, and now, it’s making me money.
At my last apartment, I was the go-to handyman for our complex. They took a small chunk off my rent and paid me by the hour when I was on a job. Saving and earning at the same time.
Now that I’ve moved, I no longer am the go-to for that complex. Instead, I’m the go-to for all rental units owned by that investor in my city. That’s an incredible opportunity for me to make money outside of my normal 9-5.
Growing up, did I think this kind of circumstance would come upon me? Of course not. But that’s the thing. No matter how you think your life will turn out, it hardly goes that way.
You have to vary your knowledge and competencies across a range of industries. You truly never know what will fall into your lap.
From there, we’re going to take a hard right turn into a different topic
Consumer Math
This is something that should have been on my radar, but it wasn’t. Until this morning. My cousin is taking a consumer math course, and after learning about what it was, I have to promote it.
You can find a consumer math course anywhere, and they all teach the same thing.
Math for real-world situations.
It’s basically a personal finance course. It teaches things like budgeting, taxes, loans, buying a car, wages, deductions, spending, and transportation.
These are topics that everyone should be knowledgeable about, as they lay the foundation for your financial life. Ace these, and you’re steadfastly in the driver’s seat of your finances.
Quick Wrap-Up
Above, we covered two things. Being handy and having a wide range of knowledge can help you later in life, and how having a foundational understanding of consumer math puts you in control of your finances.
Both of these are vitally important but dramatically undervalued by the masses.
Related Reading:
My Life and How I Manage Stress
How to Teach Your Kids About Money
Why Financial Literacy is Important
My name is Jacob Sensiba and I am a Financial Advisor. My areas of expertise include, but are not limited to, retirement planning, budgets, and wealth management. Please feel free to contact me at: jacob@crgfinancialservices.com
5 Surprising Things Not Covered By Homeowners Insurance
Overall, homeowner’s insurance is fairly comprehensive. It financially protects you from the burden associated with a variety of potential events. This ensures that you can move forward with repairs or replace stolen or damaged belongings. However, homeowners insurance doesn’t cover everything. In fact, there are some gaps that many don’t expect. These gaps can lead to a rude awakening if certain kinds of events occur. If you are wondering what is not covered by homeowners insurance. Here are five things that usually aren’t.
Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.
How to Answer a Civil Summons for Credit Card Debt
You do what you can, but sometimes debt gets out of control. If you get far enough behind on your credit card payments, eventually, the lender or a debt collector will file a suit against you to get what they’re owed. In this article, we’ll explore what a civil summons is and what to do when you’re faced with one.
What is a civil summons?
Generally speaking, a civil summons is when a governing body, individual, or organization files a lawsuit or judgment against another individual or organization.
The document indicates the reason for the suit or administrative action. It also listed pertinent information, such as the time and date of the first hearing, details about the plaintiff and defendant, and the amount of time the defendant has to respond.
A civil summons with regard to credit card debt usually occurs when the account reaches “charge off” status. Charge-off status usually happens between 120 and 180 days.
With that said, here are the steps you need to take.
Don’t ignore it
This is the worst thing you can do. The suit will continue, whether or not you respond. If you don’t respond, the court will issue a ruling in favor of the lender.
That means you will be forced to pay what’s owed. They may also tack on attorney fees, court fees, and interest to your balance.
Negotiate
Get in touch with the lender/collector that filed the suit, and see if they will accept a lower amount.
The filer may ask for a lump sum or a series of payments. The negotiated amount can range from 40% to 80% of the original balance.
Who filed the suit also makes a difference in negotiation. If the lender is after you, they will be less willing to negotiate a lower amount than a debt collector that bought the debt at a discount.
Research
If negotiation doesn’t work, it’s time to build your defense. Get a hold of the lender or collector again and gather information.
- Check through your records to confirm if the debt owed belongs to you – do the amount and the original lender match up? Is it yours?
- Get a chain of custody records – does the filer have the legal right to do so?
- How long have you owed the debt – the statute of limitations could forbid the suit based on how long you’ve owed it
- Get proof from the filer – are their records accurate? Is the information listed correctly? If the filer has missing or incorrect information, this can work in your favor.
- Get copies of everything – accurate and complete documentation is very important
Talk with a professional
Get a consultation. Often, these are free. At the very least, it’ll help get a better understanding of what you’re up against and what you should do.
If money is tight, there are organizations, like lawhelp.org, that will provide an attorney that volunteers their time.
If money isn’t as tight, vet and hire an attorney to help your cause.
Go to court
If negotiation and settling outside of court don’t work, then it’s time to go to court. Here’s what you have to do.
- Formally answer the summons with the court. This has to be in writing and generally, you have to answer within 20 to 30 days of receiving the summons.
- In your reply, you have three answer options: admit, deny, or lack of knowledge. Admit it’s your debt, deny it’s your debt (only if you’re 100% sure), or attest that you don’t have enough information to say otherwise.
Options after court
If the ruling goes your way, there’s not much else to do. However, there may be terms you need to settle on, depending on what the judgment was, so you may not be completely out of the woods yet.
If the ruling doesn’t go your way, you have a few options.
- Try negotiating with the lender/collector again.
- Pay the amount mandated by the court
- Argue the ruling by filing an appeal
- File for bankruptcy
- This is the last resort and should only be used if there’s no way to pay back what you owe.
Credit score
Your credit score will take a big hit throughout this process.
- Prior to 30 days late, it won’t affect your credit score, but you will be charged late fees (most likely).
- After 30 days, a late payment will show on your report. On-time payment is the number 1 factor when calculating your score, so expect a significant drop.
- The impact late payment has on your credit gets worse as you pass 60 and 90 days.
- As stated, a suit normally isn’t brought against you until 180 days late. At that point, the account is listed in “charge off” status and that will really hurt your score.
Obviously, you want to do everything possible to prevent being served a summons for your being behind on your credit card bills, but if you get there, these are the steps you need to take.
Related reading:
What Happens When You Fall Behind On a Mortgage?
What You Need To Know About Bankruptcy
What Affects Your Credit Score
How To Pay Off Credit Card Debt
My name is Jacob Sensiba and I am a Financial Advisor. My areas of expertise include, but are not limited to, retirement planning, budgets, and wealth management. Please feel free to contact me at: jacob@crgfinancialservices.com
Here’s Why Refinancing Your Car Is A Bad Idea
If your budget is tight and you are struggling to keep up with your monthly obligations, finding a way to lower your auto loan payment might seem like a smart move. Usually, car payments are one of the largest expenses in a household for those with an auto loan. The average new vehicle loan payment comes in at $554, while the average for used cars sits at $391. If refinancing lets you lower that amount, going through with it may be enticing. But refinancing a car isn’t always the best way to go. In fact, it can get you into some financial trouble if you aren’t careful. If you are considering an auto loan refinance, here’s why refinancing is a bad idea.
Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.
How Bitcoin Trading Software Work as Automation?
Deciding for something is a great thing, which a trader takes every day for his work. A trader needs to see several tools to make an informed decision before buying or selling a stock. [Read more…]
Down Payment or Investment Opportunities?
The current dilemma I am having is whether to stash my savings for a down payment on a house or contribute to my Roth so I have cash available for buying opportunities.
I’m pinching pennies, and I’m saving money wherever I can so that cash is accessible when I need it. I just don’t know what to do with it.
Do I put it towards a down payment or set it aside for investment opportunities. Like most things in life, the answer will lie somewhere in the middle.
Down payment
I’ve mentioned in prior reflections that I’m renting right now.
I’m renting because I got divorced and exhausted all of my savings on the down payment for my house. That house is currently being rented by another family, and my ex-wife and I still own it.
That’ll help build equity into the house so we receive more if/when we decide to sell, which is good.
I’m happy with my current living arrangements. I like the place. I like the neighborhood. My commute to work is 2 minutes, and I’m close to all of my family and friends. All good things.
The only bad part is I have no outdoor space to call my own. I have no yard.
I’m trying to frame it positively by saying that I’m not spending my time on yard work, and instead, have more time to spend with my son/work on myself when he’s not here. These are both very good things.
However, I want to give my son a space to play. A place to put a jungle gym and a sandbox. A place where he can just run around and have fun.
I want to give him that because he deserves it. I want to use my savings for a down payment on a house so we can have a place to call our own.
Investment opportunities
Here’s the second part of my dilemma. I see a lot of chances to put my money to work in the market.
I’m able to play the long game because of my investment philosophy and my training. The best investors I have long-term time horizons.
What I mean to say is I can see past the present and I have an idea of what my investments can do over the long term, and the [possible] reward for investing now can’t be ignored.
That’s why I’m having a difficult time deciding what to do.
What will I do?
As a parent, you want to give your kids everything. I want to have a place we can call our own.
At the same time, I know how valuable it is to start saving and investing early so I can take advantage of compounding returns.
So here’s what I’m thinking. I’m going to develop a “savings plan”. I’ll take the dollar amount for an ideal down payment and how far in the future (in terms of years) when I’ll want to use it.
I’m thinking of $25,000 for a down payment and four years until I’ll use it. I’ll, then, divide $25k by 48 to get my monthly savings goal. Anything over that number I’ll put in my Roth.
That’ll take care of saving for a house and for retirement.
My Last Reflection:
My Experience with Life Insurance
Related reading:
What is Time Horizon and Risk Tolerance?
My Life and How I Manage Stress
My House and What Brought Me Here
My name is Jacob Sensiba and I am a Financial Advisor. My areas of expertise include, but are not limited to, retirement planning, budgets, and wealth management. Please feel free to contact me at: jacob@crgfinancialservices.com
How is Passive Income Taxed?
A lot has been said about passive income.
“If you don’t find a way to make money while you sleep, you will work until you die.” ~ Warren Buffett
“The key to financial freedom and great wealth is a person’s ability or skill to convert earned income into passive income and/or portfolio income.” ~ Robert Kiyosaki
With the above quotes in mind, there is a particular area of passive income that is rarely talked about…taxes.
How is it taxed? Are there particular income streams that are taxed differently than others? How do you optimize so you’re taxed favorably? We’ll cover all of that in the following article.
What is Passive Income?
As defined by the IRS, passive income is either net rental income or income from a business in which the taxpayer does not materially participate.
There are several different kinds.
Forms of Passive Income
- Real estate – If you own a property, be it a single-family home, duplex, or apartment complex, the rent you collect from tenants is considered rental income.
- Limited partnerships – As a limited partner, your only responsibility is the capital you invested. The general partner manages the day-to-day activities of the business and has unlimited liability in terms of the debt taken on by the business. You receive income as a percentage of the company revenues (percentage based on your percentage of ownership).
- Some portfolio income – speak with a tax professional on this subject, as the IRS isn’t quite clear on whether portfolio income is taxed as passive or not.
- Peer-to-peer lending – Individuals lending to individuals. If you’re looking for passive income, you lend money to someone, charge them interest, and then collect that interest.
- Equipment leasing – buy a piece of equipment and rent it out. Pretty straightforward.
Material Participation
- 500+ hours of activity per year towards the “business” to which the income is received
- Up to 100 hours of participation per year and at least as much as anyone else participating in the activity
Taxes
Passive income is taxed in a couple of different ways. First off, passive income losses can only offset “actual” passive income.
Capital gains
- Short-term – Taxed at your ordinary income tax rate. For 2020, the rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
- Long-term – Gains from “investments” held for over one year. The tax rates for long-term gains are 0%, 15%, and 20%.
Real Estate
- 1031 exchange – take capital gains from selling a property and use it to buy another property. Then, you don’t have to pay taxes on those gains.
- Tax write-offs – You can write off depreciation, money spent on the property, and amortization (interest on a mortgage).
- 20% “safe harbor” deduction if your income is below a certain threshold. I’ll link to a resource for more information about this one (see here).
Taxes are anything, but simple. Please speak with a qualified tax professional.
Related Reading:
How to Pay Taxes on 1099 Income
Why Financial Literacy is Important
Could Refinancing Save You Money?
How to Manage Your Side Income
My name is Jacob Sensiba and I am a Financial Advisor. My areas of expertise include, but are not limited to, retirement planning, budgets, and wealth management. Please feel free to contact me at: jacob@crgfinancialservices.com
My Experience with Life Insurance
Life insurance is necessary. Sure, you can make the argument that a single person with no children probably doesn’t need it, but I disagree.
No, they don’t have anyone to support, but someone will have to pay for the funeral and burial arrangements. Get a little bit as a courtesy to the person responsible for your remains.
In this article, I’m going to share my personal feelings on life insurance, as well as my current circumstances with my own policy/estate planning.
Life Insurance
As I said in the beginning, life insurance is a necessity. However, the purpose of the policy and the type of policy will differ from person to person.
This makes sense, right? Everyone is different, with different circumstances and points-of-view, so their insurance policy should be tailored to meet their needs.
With that in mind, my personal opinion with regard to life insurance is that it should only be an insurance product. There are several different types of life insurance (i.e. whole life, universal life, variable life, etc.).
Each serves a purpose and has unique advantages and disadvantages.
You might think that one or several of those products are the bee’s knees, and I’m not saying any of those are good or bad. As I stated, life insurance should just be about insurance. My desired life insurance product is term insurance.
It’s bare-bones coverage. You select the term you want to be covered for and the death benefit. That’s it.
Insurance and Investing
Term insurance is much less expensive than the other products out there. The intention behind this is to compare term insurance to your typical whole life product.
Specifically, compare the monthly premium of the two. Whatever the difference is, contribute that to an investment or retirement account.
Be advised: This is not a recommendation for best practice, just my personal opinion.
This strategy will not suit everyone. Whole life can be a great way to diversify your holdings if you’re a wealthy individual. Retirement accounts have contribution limits. A whole life policy could be another “bucket” of retirement savings.
My Current Setup
When I found out I was going to be a dad, I got life insurance. Specifically, I got a 30-year term policy with a $300,000 death benefit. That still exists and I’m still paying for it.
I would like to get some more so I can set my son up if anything were to ever happen, but first, I need to make some changes.
Since I got divorced in February, I need to do some creative estate planning because my son is only 2-years-old. I can’t directly leave him the money because he’s a minor.
I need to see an estate attorney, once things return to normal, to set up a trust. I’m doing it this way because I can set up a guardian for my son and someone to take control of the money if I were to pass away.
There are several other nuances to estate planning that I have yet to experience, so I’ll be sure to give an update once everything is all said and done.
My Last Reflection:
How My Finances Changed with Covid
Related Reading:
Ultimate Estate Planning Guide
My name is Jacob Sensiba and I am a Financial Advisor. My areas of expertise include, but are not limited to, retirement planning, budgets, and wealth management. Please feel free to contact me at: jacob@crgfinancialservices.com