Life After Bankruptcy

Bankruptcy is an uncomfortable subject for a variety of reasons. The most obvious is the potential havoc it can wreak on your finances. Running a close second is the negative stigma which is often attached to the process. This negativity is important to mention because strong emotions can sometimes lead to unsound financial decisions with devastating results.

Bankruptcy becomes a viable option for someone who is “upside down” in terms of cash flow. In other words, when a person has more money going out each month than coming in, bankruptcy should be considered if no reversal of this negative cash flow is within sight. The longer someone waits to explore the various options available, the more serious his or her situation may become.

One of the worst things people can do in this situation is to borrow more money to try and pay off their debts. On paper, this is clearly an unwise financial decision. In the real world, however, it is very common for individuals to pursue this strategy in an attempt to buy time and hold off on filing for bankruptcy. On the surface, this is certainly a noble notion; however it can often compound the problem and serves only to delay the inevitable.

For many homeowners in the midst of this upside down cash flow, speaking to a qualified mortgage professional is a much better option. An experienced loan officer can objectively look at your finances and help you determine if restructuring your mortgage would not only help, but possibly even alleviate any need for bankruptcy.

If bankruptcy is the only option, seek out a reputable bankruptcy attorney and credit counselor. A qualified mortgage specialist can provide references for you as well, as he or she works with these professionals on a regular basis. Reliable references are essential in this case because experienced professionals greatly increase the odds of a successful bankruptcy experience. It’s that simple.

When filing for bankruptcy, be completely honest and accurate regarding every aspect of your financial situation. This includes any changes to your income which may occur throughout the process. Bankruptcy is a federal procedure, adjudicated by real judges, and scrutinized by representatives who coordinate with the Department of Justice, the FBI, and the IRS.

Here are some additional steps you can take to make the bankruptcy process as painless as possible:

• Save all paperwork regarding your bankruptcy, and keep it organized. This will prove beneficial after your bankruptcy as you now have all of the pertinent information in one place. Also, be sure to write down your discharge date. It’s surprising how many people forget to do this.
• Establish a household budget. This can be accomplished in many ways, but there are several inexpensive computer programs available which do an excellent job.
• Throughout the bankruptcy, do your best to not only live below your means, but to save as much cash as possible. You never know what you may need it for once the process is completed.
• Be prepared for a barrage of junk mail. There will be sharks on the loose who are hoping to capitalize on your need for credit.

Tips for Rebuilding Credit:

• If you must buy a car, focus on transportation as opposed to style. Buy an inexpensive, used car, and try to get a loan for it. It’s a good idea to figure out what your budget allows in terms of a dollar amount first. This means obtaining financing prior to looking for a car.
• Get a secured credit card. Secured credit cards allow for the cardholder to deposit a said amount of money into an account, thus establishing the spending limit of the card. Missed payments result in deductions from the account. Some of these cards will reward responsible borrowers by upping the limit without an additional deposit. Some will even convert the account into a traditional credit card. (Be wary of offers of “easy credit” or any card which asks you to call a 900 number. You will be charged for the call.)
• Meet with a credit repair specialist. Not only can they help you clean up the damage to your credit report, they can advise you on specific ways to rebuild the credit you lost as well.

While it does take time, there is definitely life (and credit) after bankruptcy. Some mortgage lenders will even lend to you within a year or so after a bankruptcy. If you’re in serious financial trouble, the trick is to get the help and advice you need from professionals you trust.

Christy Fuentes is affiliated with Capital Mortgage, a Licensed Broker, Oklahoma Department of Real Estate. For a free copy of our Consumer Credit Scoring Booklet, contact Christy Fuentes at 405-514-6401. 

Welcome to Spring

Spring is officially here, and I hope this will be a fun time of year for you and your family. If you have any questions about ways to make your finances bloom, give me a call. I'm always happy to talk to you.
Christy Fuentes Mortgage Consultant Capital Mortgage Corporation Phone: (405)514-6401 Fax: (405)691-3743 License: 218690 christyfuentesloans@gmail.com www.christyfuentesloans.net

Understanding Credit Scoring & Credit Repair

Seek a Qualified Mortgage Consultant to Ensure the Best Results

Credit remediation is a subject consumers often face with fear and trepidation, and for good reason. With the exception of recognizing that the best score wins, the average home shopper knows very little about the whole credit scoring process. Sub-prime borrowers who are eager to move into A-Paper territory often find themselves at a loss when trying to find ways to upgrade their credit history. The good news is there are ways to improve less-than-perfect credit scores and obtain a loan for the home you really want.

The first step in the process is making sure that you have a current copy of your credit report. Congress recently amended the Fair Credit Reporting Act so that consumers may now receive one free credit report annually. There are three major credit bureaus: Equifax, Experian, and Transunion. Since entries can vary across bureaus, you’ll want to request a free report from each of the three companies. (Go to www.annualcreditreport.com)

It's also important to know just what a good credit score is. Most A-Paper scores generally begin around 680, although this number may differ slightly among lenders. Don't despair if you come up shy, there is always room for improvement. Increasing your score just 5 points can save a significant amount of money. For example, if your score is 698 and you increase it to 703, then you could save yourself thousands of dollars over time as a result of a slight improvement to your loan’s interest rate.

While credit repair is necessary for some, it's not the only way to increase your credit score. Even if you have stellar credit, you can enhance your score through these steps:

·       Evenly distribute your credit card debt to change the ratio of debt to available credit. Let's say you have a credit score of 665. If you have debt on only one card, and four additional credit cards with zero balances, evenly distributing the debt of the first card could move you closer, and possibly into, that ideal bracket.

·       Keep your existing accounts open and active. The average consumer is usually anxious to close credit card accounts that have zero balances, but doing this can cause them to lose the benefits of a long-term credit history and increase their ratio of debt-to-available credit. The bottom line is don't close those old accounts!

·       Keep credit inquiries to a minimum. Each inquiry into your credit history can impact your score anywhere from 2-50 points. When it comes to mortgage and auto loans, even though you're only looking for one loan, multiple lenders may request your credit report. To compensate for this, the score counts multiple auto or mortgage inquiries in any 14-day period as just one inquiry, so try and stay within that time frame.  

Remember, credit scores don't change overnight. Improving them requires time and diligent effort on your part, so it's a good idea to get the ball rolling at least three to six months prior to submitting your application for home financing. 

If credit repair is what you need, you can either begin the process yourself or seek out a repair service. If you decide to make your own improvements, visit as many websites as possible to get information regarding credit laws and consumer rights. Diligently search through them and educate yourself to ensure that you don’t sustain any self-inflicted wounds. A good place to start would be the Federal Trade Commission's website, which contains a wealth of helpful literature. 

If you’re facing severe or complicated credit issues, then you’ll probably want to enlist the assistance of a professional credit repair company. Before you do, be sure to familiarize yourself with the FTC's regulations on credit repair. With over 1100 credit repair companies to choose from, it's important to be certain you are dealing with a reputable firm. Examine the FTC's information on fraudulent practices to avoid falling prey to credit repair scams.

Addressing credit issues can be uncomfortable to say the least. But by taking these steps now, you’ll be that much closer to obtaining the home of your dreams.

Additional Resources:

To order your free credit report, go to:

www.annualcreditreport.com

To read the Fair Credit Reporting Act, go to:

www.ftc.gov/os/statutes/frca.htm

For the Federal Trade Commission's information on consumer credit, go to:

www.ftc.gov/bcp/conline/edcams/credit/index.html

13 Tax Deductions You Can't Ignore

Tax time is quickly approaching and I'm sure many of you need all the help you can get.  Check out this great information I recently found on USAA.  Then, if you have questions about your mortgage, give me a call.  I'm happy to help!!

Before tackling your tax return, brush up on this baker's dozen of deductions that could cut your tax bill.

1. Traditional IRA Contributions

You have until April 18, 2011, to contribute up to $5,000 to a traditional IRA for 2010 and deduct it on your tax return. Here are some guidelines.

If you weren't covered by an employer's retirement plan in 2010, you can generally deduct your contribution in full.
If you were covered by an employer plan, you can only take a deduction if your adjusted gross income was below $66,000 ($109,000 for married couples).
If your spouse was covered, but you weren't, you can take a deduction if your combined adjusted gross income was below $177,000.
If you were age 50 or older on the last day of 2010, you can contribute up to $6,000.

2. Self-employed Retirement Plans

If you work for yourself, you can open a Simplified Employee Pension-IRA by April 18, 2011, and deduct your contribution on your 2010 return. SEP-IRAs are an easy way to create your own retirement plan, and they can allow much higher contributions than traditional IRAs.

3. Mortgage Interest

You can deduct interest paid on your primary mortgage, as well as home equity loans and lines of credit. In general, you may deduct interest on up to $1 million of primary mortgage debt and up to $100,000 of home equity balances.

4. State and Local Taxes

Feeling like every single government entity is after your money? Fortunately, the federal government cuts you a little slack, letting you deduct property and income taxes imposed by state and local governments.

5. Sales Tax

If you paid little state income tax, or live in a state that doesn't tax income at all, you can choose to deduct sales tax instead. And you don't need receipts. Simply calculate an assumed amount using an IRS table or online calculator.

6. Charitable Gifts

Donations to charity can ease your tax burden, but only if you have the right documentation. Cash contributions, regardless of the amount, require a cancelled check or dated receipt. Any contribution of $250 or more requires a written acknowledgement from the charity. Noncash contributions valued at more than $5,000 generally require an appraisal.

7. Student Loan Interest

Some or all of interest on loans taken out to pay qualified higher education expenses is generally deductible if your adjusted gross income is less than $75,000 ($150,000 if you're married and file a joint return). You may also be eligible for the Hope or Lifetime Learning tax credit (See IRS Publication 970).

8. Medical and Dental Costs

The government sets a high hurdle for these expenses. You can only deduct them if they exceed 7.5% of your adjusted gross income.

9. Health Insurance

Self-employed taxpayers get a big break on one of their biggest financial headaches. In general, they can deduct all of their health insurance premiums.

10. Health Savings Accounts

If you were covered by a high-deductible health insurance plan in 2010, you can contribute up to $6,150 to a health savings account ($3,050 if it only covered yourself). Contributions are deductible and withdrawals for qualified medical expenses are tax-free. Similar to IRAs, you have until April 18, 2011, to contribute for the 2010 tax year.

11. Job-related Moving Expenses

If you moved to take a new job, you can deduct your expenses if you pass these two IRS tests:

Your new job must be at least 50 miles farther from your old home than your previous job was. If you didn't have a previous job, your new one must be at least 50 miles from your old home. If you're in the military with PCS orders, you do not have to meet these rules.
If you're an employee, you must work full time for at least 39 weeks during the 12 months after you arrive in the general area of your new job. If you're self-employed, you have to work full time for at least 39 weeks during the first 12 months and 78 weeks during the first 24 months.

12. Guard and Reserve Travel Expenses

If you traveled more than 100 miles to attend a drill and spent the night, you can deduct your lodging expenses, half the cost of your meals and 50 cents per mile for travel. You can also deduct tolls and parking fees.

13. Out-of-pocket Teacher Expenses

Teachers, aides, counselors and principals -- kindergarten through 12th grade -- can deduct up to $250 for classroom supplies purchased in 2010.

YOU Magazine - April 2011

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Christy Fuentes Mortgage Consultant Capital Mortgage Corporation Phone: (405)692-2345 Fax: (405)691-3743 christy@capital-mortgage.com http://www.capital-mortgage.com/about_us.html License: 218690

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