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5 Crucial Things To Keep In Mind About Bankruptcy

5 Crucial Things To Keep In Mind About Bankruptcy

Whether you’re on the road to bankruptcy, or thinking about declaring your business in a state of bankruptcy, this process isn’t as clear-cut and simple as you might initially think.

In Canada, it is largely due to the fact that it is a federal government affair and requires a fair amount of paperwork and legal proceedings. This can take a huge amount of time and money out of your life. Fortunately, the bankruptcy system has been designed to keep the cost of bankruptcy as low for you as possible.

However, you should know that you’ll also lose all your possessions and all your money unless, of course, your possessions are assets – then they’re exempt (as long as they are in your particular province).

Let’s quickly delve beyond the surface of bankruptcy and discern what it’s all about.

1. Bankruptcy Costs

Usually, the process of bankruptcy includes fees, such as administrative costs, government-fees (for the bothersome task of filing all the paperwork), mailing costs, court fees, etc. This, as you can imagine, takes a lot of money out of your account(s).

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The average cost of bankruptcy (usually – as it varies between provinces) is between $1,500-1,900. The differences in cost is wide because, largely, the fee is set by your Insolvency Trustee. The trustee’s charge is a reflection of the Office of the Superintendent of Bankruptcy (OSB).[1] Keep in mind that the trustee’s charge is a reduced fee. This fee is based on what number your chosen trustee charges to file your bankruptcy paperwork.

You need to pay due diligence when it comes to picking an attorney to represent you in bankruptcy court. This is because there are some reports of attorneys collecting their fees and “dumping” the filing process and proceedings on another attorney’s shoulders. This is why it’s necessary to perform thorough background checks on attorneys and lawyers. Luckily, looking for reviews and testimonials and public ratings about such attorneys are easy to find, thanks to the internet.

However, if bankruptcy costs are more than you can pay, it’ll be to your satisfaction to contact a licensed Insolvency Trustee.[2]

2. What’s the Difference Between Lawyers And Trustees?

A trustee is a licensed official (by the federal government) who works with specific insolvency issues.[3] Many trustees are chartered accountants.

Bankruptcy lawyers, on the other hand, are solicitors who are experts when it comes to insolvency law.

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Unless a bankruptcy filing has several discrepancies, lawyers are not generally required in most cases.

3. How Bankruptcy Lets You Rise From The Ashes

Since bankruptcy is governed by federal law, the process is similar from state to state and it’s a process that will keep you busy.

Be careful when filing for bankruptcy. Your credit score can take a serious beating, since bankruptcy lowers your score by as much as 250 points, which, as you know is not peanuts.[4]

It’s a great way to erase your debt, however. Bankruptcy gives you a fresh start, a chance to wipe the slate clean, and a way to rebuild your credit score. If your bills haven’t defaulted (and your debts are through the roof), there’s a possibility your credit score is high enough to pass you through a mortgage refinance. This could potentially qualify you for a lower interest rate.

Since lower interest rates reduce monthly house payments, this means more freed-up cash in your budget so you can pay off any outstanding debts.

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4. What Does Bankruptcy Affect?

Don’t worry, if you’ve invested in 401k, IRA, or ERISA accounts, they’ll (in all probability) remain unaffected by the bankruptcy.

That means you do not take any money from these accounts to pay bills. Even if you’re pressed against the wall and these look like great last resorts, do not. The reason for this is simple: you’ll be hit with staggering penalties and taxes. These can never be discharged and will forever remain on your credit score. This makes it extremely hard to attain home loans in the future, which is why you should NOT take bankruptcy lightly. That is why you should check your credit report 60 days after you bankruptcy case closes. That way, you can check if there are any errors. It’s critical to stay on top of the report after bankruptcy, as there may be some mistakes.

After filing for bankruptcy, check your mail every single day. The court should send you legal paperwork that needs your signature by a certain date. Missing this paperwork means your case loses momentum and you’ll be stuck in this state for an even longer period. Once these documents arrive in your mail, review them carefully. And review them again to make sure you haven’t missed anything crucial.

And once you’ve set up an appointment or discussion with your attorney, update him/her on any relevant information that’s happening in your life because the more your attorney knows, the more successful your case will turn out. Your life and income (even your family’s life) is on the line here. Good, constant communication is key.

5. You Shouldn’t Declare Bankruptcy If…

You don’t need to go bankrupt just because you’re unable to pay your debts or are insolvent. Declaring bankruptcy seems like a smart thing to do when tides are low, but the reality of the situation is this:

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Sometimes bankruptcy is not a good option.[5]

It honestly depends on your situation. Let’s say a huge number of your debt is because those debts aren’t dischargeable. It would be inadvisable to file for bankruptcy. This is because non-dischargeable debts, such as child support, fines and penalties, student loans, etc. will remain on your record. Bankruptcy means that only debts that are dischargeable will be erased from your record.

Even so, it’s more important to know if you even need to file for bankruptcy. This is because a large amount of cases come down to credit or debt counseling. Knowing how to expertly handle your debt and credit scores/cards increases the likelihood that you won’t have to file for bankruptcy in the end.

Conclusion

Now you know more about bankruptcy and how to make wiser decisions. If, however, it’s too late and filing for bankruptcy is an absolute must, it is essential for your sanity and happiness that you remain cool, calm, and collected as you go through this process.

Featured photo credit: palmistryextraordinaire via palmistryextraordinaire.com

Reference

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Maya Levine

Passionate Writer & Researcher

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Last Updated on January 2, 2019

How Personal Finance Software Helps You Get More Out of Your Money

How Personal Finance Software Helps You Get More Out of Your Money

Do you know what mental health experts point to as the biggest cause of stress in the United States today? If you said “money,” then ding, ding, we have a winner!

Three out of four adults today report feeling stressed out about money at least part of the time. People are either worried about not having enough money or whether they’re putting the money they do have to use in the best possible way.

Your money is either in charge of you or you’re in charge of it, there’s no middle ground. Using some type of personal finance software can help alleviate some of that money stress and better allow you to manage your money effectively. Without it, you may just be setting yourself up for constant financial worry. Life is already tough enough and there’s no need to make it more difficult by simply hoping your money issues will all work out in your favor. Hint: they won’t.

This guide will help you to understand how personal finance software can better assist with both accomplishing long term financial goals and managing day-to-day aspects of life.

Whether it’s tracking the savings plan for your child’s college fund or making sure you won’t be in the red with the month’s grocery budget, personal finance software keeps all this information in one convenient place.

What Exactly is Personal Finance Software?

Think of it like the dashboard in your car. You have a speedometer to tell you how fast you’re going, an odometer to tell you how far you’ve traveled, and then other gauges to tell you things like how much gas is in the tank and your engine temperature. Personal finance software is essentially the same thing for your money.

When you install this software on your computer, tablet, or smartphone, it helps to track your money — how much is going in, how much is going out, and its growth. Most personal finance software programs will display your budget, spending, investments, bills, savings accounts, and even retirement plans, levels of debt, and credit score.

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How It Leads to Financial Improvement

It shouldn’t come as a surprise, but people who regularly monitor their finances end up wealthier than those who don’t. When you were a kid, keeping track of all of your money in a porcelain piggy bank was pretty easy. As we get older, though, our money becomes spread out across things like car payments, mortgages, retirement funds, taxes, and other investments and debts. All of these things make keeping track of our money a lot more complicated.

Some types of personal finance software can help make things a little less complicated, setting you up to meet financial goals and taking away some of the stress associated with money.

Even if you already have a Certified Financial Planner (CFP) some type of personal finance software can be of great benefit. Whereas CFPs focus on the big picture of your money, they don’t handle the day-to-day aspects that determine your overall financial health.

It’s also not nearly as complicated as you might think and can take out a lot of the tedium that comes with doing everything on an Excel spreadsheet or with a pad and pencil.

Types of Personal Finance Software

When it comes to personal finance software, it generally fits into two categories: tax preparation and money management.

Tax preparation software such as Turbo Tax and H&R Block’s software can help with everything from filing income taxes to IRS rules and regulations and even estate plans. Plus, there’s the benefit of filing online and getting your refund check a lot faster than if you were to mail off your forms after waiting in line at the post office.

For the purpose of this article, however, will be focusing more on the personal finance software that aids with money management.

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Money management personal finance software will help you to see the health of your cash flow, pay down debt, forecast for expenses and savings, track investments, pay bills, and do a host of other things that 30 years ago would have practically required a team of accountants.

When to Use Personal Finance Software

So far we’ve gone over what exactly personal finance software is and how it can be a benefit to your money. The next logical step in this whole equation is determining when it should be used and how is the best way to go about getting started using it.

Below are four of the most common and practical ways to use personal finance software. If all or any of these apply to you and your money, then downloading some type of personal finance software is going to be a smart move.

1. You Have Multiple Accounts

There’s a good chance that when it comes to your money, it’s in more than one place. Sure, you probably have a checking account, but you may also have a savings account, money market account, and retirement accounts such as an IRA or 401k.

If you’re like the average American, you probably have two to three credit cards as well. Fifty percent of Americans also don’t have loyalty to just one bank and spread their money across multiple banks.

Rather than spending hours typing in every detail of every account you have into a spreadsheet, many programs allow you to easily import your account information. This will help to eliminate any mistakes and give you a bird’s eye view of everything at once.

2. You Want to Automate Some or All of Your Payments

Please don’t say that you’re still writing out paper checks and dropping each bill in the mailbox. While it’s noble that you’re doing your part to keep postal workers employed, we’re 18 years into the 21st century and you can literally pay every bill online now.

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There’s no need to log into every account you have and type in your routing number either.

With personal finance software you can schedule automatic payments and transfers between all of your imported accounts. Automatic transfers will help to make sure you have the necessary funds in the right account to ensure all bills are paid on the appropriate date. Late fees are annoying and do nothing but cost you money. It’s time that you said goodbye to them once and for all.

3. You Need to Streamline Your Budget

Perhaps the best feature of personal finance software is that it allows you track everything going in and out of your virtual wallet.

Nearly every brand of personal finance software out there has easy-to-read graphs and charts that allow you track every cent you spend or earn, should you choose. You might be pretty amazed when you see just how much you spent on eating out last month or if you splurged a little more than you should have on Christmas gifts last year.

Every successful business on the planet has a budget and using personal finance software can help you trim the fat on your spending in ways that affect your everyday life.

4. You Have Specific Goals to Meet

Maybe it’s paying off debt or saving for up something like a European vacation. Whatever your financial goal is, whether it’s long-term or short-term, personal finance software programs are one of the savviest ways to go about reaching those goals.

You can do everything from set spending alerts to notify you when you’re over budget to automating what percentage of your paycheck goes to things like retirement investments. The personal finance software that you choose should show you exactly how close you are to hitting those goals at any given time.

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How to Get Started

From AceMoney to Mint and Quicken, there ’s no shortage of personal finance software apps out there. Many of these programs are free to download and will allow you to pay bills, invest, monitor your net worth and credit profile, and even get a loan with the swipe of a finger.

Other programs may only offer you limited services and will require a one-time fee or subscription to unlock all that they offer. These fees can often vary from as little as two dollars to 50 bucks a month.

It’s best to start off with the free version and then gauge whether you’re able to accomplish everything you’d like or if it’s worth exploring one of the paid options. Often times the subscription programs come with assistance from financial planning and investment experts — so that can be a real benefit.

When deciding which personal finance software program to use, it’s also important to look at how many accounts you wish to monitor. Certain programs limit the number of accounts you can add. Be sure that if you have checking, credit card, and investment accounts to monitor, that you choose a service that can monitor them all.

Finally, when looking around for the right personal finance software that meets your needs, make sure that you’re comfortable with the program’s interface. It shouldn’t be expected that you recognize every single feature instantly, but if the features don’t seem readable and manageable to you, then you’re not as likely to use it and get the full benefits.

Final Thoughts

Personal finance software can go a long way in helping you to take control of your money and meeting your financial goals. It’s important to note, however, that some focus more on budgeting and expense tracking while others prioritize investing portfolios and income taxes. Explore several different programs and read reviews to find the one that’s right for you.

In this day and age, managing one’s personal finances in a secure manner that allows the user to have a real-time visual representation of their money is easier than ever before. With the numerous applications that are out there — both free and subscription-based — there’s no reason that every person can’t take control of their money and ensure they’re making smart money moves.

Featured photo credit: rawpixel via unsplash.com

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