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Economic Pressures

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There’s a lot of movement in the economy. Several different news threads and innovations have the ability to change the direction and velocity in which our economy moves. In today’s newsletter, we’re going to talk about some of those economic pressures, what they entail, and what they mean for our economy.

Taxing corporations and the wealthy

A news story recently came out about taxes. More specifically, this news shed light on how the wealthy manipulate the tax code in their favor.

I think the information shared in this story was well known already, or assumed rather, but served as a confirmation. A large number of wealthy individuals aren’t “paying their fair share” in taxes.

This will only add fuel to the fire. The fire I’m talking about is the tax overhaul in the tax code. The Biden administration has said that they want to increase taxes on corporations and wealthy individuals/families.

If they’re successful, it would mean more tax revenue for the federal government, which is a good thing. Is there a chance that the increase in taxes creates a disincentive for those corporations and wealthy individuals?

Perhaps, but I don’t think it’s very likely, broadly speaking. I have only one reason…those corporations and individuals are good at making money, and I believe that will continue.

Government spending

As I said, the change in the tax code will generate more income for the federal government. You may be thinking, “Great! We can reduce the national debt!”

I think that’s very unlikely. That may sound skeptical, and it probably is on some level, but both parties are spenders now. It doesn’t matter if it’s a Republican or a Democrat in the White House, they’re both going to print money to push forward their agenda.

Borrowing costs

I’ve talked about inflation a lot lately, and I promise I’ll tone down after I make this point, but I haven’t explained why runaway inflation is a bad thing.

Now don’t get me wrong, there are advantages (i.e. increased rates on savings accounts), but the disadvantage is higher prices. Households can run into trouble because they can’t afford necessities anymore.

The larger problem, however, is the cost of borrowing. Over the last, almost 15 years, rates have been low. And they’ve stayed low, other than an attempt to increase in 2018.

People and corporations borrowed a lot of money. Some bought things they didn’t need. Others to increase research, development, and innovation. Some people used record amounts of leverage to take part in the wild stock market (as of late).

With that said, the cost of borrowing will go up and the cost to service that debt will go up. The higher rates go, the more money that will be needed to pay for/down the debt. When that happens, less money will be spent on “productive” things.

That can slow growth and negatively impact the economy. That’s why central banks reduce rates in times of negative or low economic growth. It reduces borrowing costs and incentivizes people and companies to spend money instead of saving it.

Labor

The last thing I’ll say that has the ability to tie into the last point is the current labor shortage. There are more jobs available right now than people to take those jobs.

Small businesses, in particular, find it especially difficult to fill vacancies. Couple a labor shortage with a strong push from workers, unions, and government bodies to increase wages, and you get wage inflation.

When wage inflation becomes more prevalent, price inflation (CPI) becomes more likely. If companies have to pay their employees more, they need to account for that increased expenditure somehow. They turn to increase the prices of their products and/or services.

Demand is unlikely to suffer because of higher wages. People are making more money, so they should be able to afford higher prices, right?

Conclusion

If you read back some of my other posts, you’ll see I’m optimistic in select areas of the market, and I’ll stay optimistic in those areas no matter what type of economic pressures the country faces.

With all that I said, I believe there are enough economic pressures to cause a decline in the market and the economy, but there’s no telling when that’ll actually happen.

Related reading:

Employment, Stimulus, Rising Prices

Inflation, Gold, Semiconductors

Why Financial Literacy is Important

Disclaimer

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

Don’t File Bankruptcy Due to Medical Debt-Do This Instead!

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Medical debt can create a serious financial hardship. Many health-related bills are surprisingly high, and you may not be presented with a lot of options for handling it in a manner that feels manageable. However, that doesn’t mean that you have to turn to bankruptcy to address these debts. There are other approaches that can work. If you aren’t sure where to begin, here’s a look at what you can do instead of filing for bankruptcy due to medical debt.

Review Your Medical Bills for Accuracy

First, before you do anything, you should review all of your medical bills to make sure the charges are accurate. If the healthcare facility didn’t send an itemized bill automatically, request one. Then, review every single line item and charge to make sure you are only billed for services you actually received.

If you find an inaccuracy, reach out to the facility and dispute it. That way, you can ensure that any medical debt you have is genuine.

Ask About Cost-Reduction Programs

If you are part of a low-income household, you may be eligible for financial assistance programs through the healthcare facility that are designed to eliminate your medical debt burden. Some will reduce the amount you owe by a specific percentage based on your income level and the amount owed.

With those programs, you usually need to complete some paperwork to prove eligibility. Additionally, if you don’t have health insurance, you may be required to apply for Medicaid to qualify. However, once that is done, all or a portion of your debt is essentially eliminated.

Negotiate for a Lower Rate

In some cases, you can actually negotiate your medical debt down. This is especially true if you are able to make a substantial lump sum payment but can’t cover the full amount. Some facilities may accept what you can offer in exchange for closing out the bill. They’ll consider it paid-in-full, even though you paid less.

At times, you may be able to use other approaches as well. For example, if you can prove that other nearby healthcare facilities charge less for an item or service, you may be able to leverage that into a discount if the difference was significant.

If you aren’t comfortable negotiating yourself, you can opt to hire a medical bill advocate. These professionals can assist with the process, ensuring you get the best deal possible.

Work Out a Payment Plan

Most large healthcare facilities have payment plan options. Some are income-driven, while others are purely time-based. With the former, how much you pay each month is derived from your income, ensuring that you don’t have to pay more than a specific percentage of your income each month. With the latter, the amount you owe determines how long you can repay. Then, the debt is divided by that set number of monthly payments.

Usually, you can find out about these programs by contacting the provider directly. In some cases, simply requesting to be placed on a plan is enough. In others, you may need to complete paperwork and provide supporting documentation, though the process tends to be straightforward.

Now, even if there is a set payment plan formula, that doesn’t mean you can request something outside of the norm. This is especially true if what you owe is close to crossing the threshold for a better deal.

For example, if the facility offers an 18-month payment plan for debts of $5,000 or more and a 12-month plan for debts under that amount, if you owe $4,925, they might honor your request for the 18-month plan. However, not all facilities will, though that doesn’t mean you should ask.

Do you have any other tips that can help someone avoid bankruptcy and deal with medical debt? Share your thoughts in the comments below.

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Rockville Advisors Reviews: The Benefits of Debt Consolidation

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Are you living your life owing money to multiple creditors? Having this kind of debt to various people will cause a lot of stress, anxiety, and depression. It feels overwhelming because you probably don’t know where to start, but it doesn’t have to be this way. When you are struggling with debt and you don’t know what to pay back first, how much you need to pay, and what will help you overcome debt in a reasonable amount of time, you should look into working with debt professionals. Rockville Advisors can help you get out of this hole by working with you to consolidate your debt.

Debt to multiple credit entities is confusing, annoying, even terrifying. Putting your debts into place will help you get a handle on what you owe and pay it back as soon as possible. Rockville Advisors reviews will offer a clear perspective on what to do when you have no idea what your path should be.

Who are the Rockville Advisors?

The company Rockville Advisors is a financial firm that specializes in debt. They help clients pay back what they owe by working with them to consolidate their debts. Reviews on Rockville Advisors not only provide a new perspective that will give you the peace of mind necessary to go forward, they will put together a plan that’ll help you pay off debt. When you work with financial professionals like Rockville Advisors, you’ll find some of the best debt consolidation options out there. Consulting the professionals will inevitably lead you to Rockville Advisors debt consolidation.  

What is Debt Exactly?

Debt is when you have taken out a loan of some kind and you haven’t paid it back yet. If you don’t have the money to pay what you owe back, you will have to make payments. The longer you go without paying it back, the higher your interest rates will be. You will pay more. Debt is something you owe to someone else, you won’t be able to get rid of it and raise your credit score if you don’t pay it back. That’s why a lot of people look into debt consolidation for bad credit. While no debt is good, a lot of it can have you spinning out of control.

How Much Debt is Too Much?

Debt becomes a big problem when you have high outstanding debts to multiple creditors. While it may seem counter-intuitive, a debt consolidation loan can help you get a handle on what you need to pay back every month. When you have a lot of debt, it gets more and more difficult to beat. If you are wondering how to consolidate debt, any amount is too much but you can work on it with professional consultants. With reviews on Rockville Advisors, they provide avenues to get out of debt.

How Do I Get Out of Debt?

The best way to consolidate debt is to work with the people who understand it the most. Rockville Advisors provide the knowledge and understanding to give you a path forward. They will show you what you should pay off immediately, what you should consolidate, and how much you need to pay every month to get on top of your debt.

While it may include a debt consolidation loan, your credit score will not improve if you can’t pay off what you owe. It will take a dip at first, but then you will be able to raise your score and work towards financial freedom. With the right help, you’ll have the opportunity to get through this and work towards true financial independence.

Why Should I Consider Debt Consolidation?

You should consider debt consolidation because it is likely what you need if you have multiple debts to creditors. It is very difficult to get out from under debt on your own, contacting the professionals who can not only provide a clear path but offer you care and support that you need during this time. You’ll be a lot better off with people in your corner who understand debt and the consolidation process because you will have real guidance and people who know what needs to get done.

How Do Debt Consolidation Loans Work?

Debt consolidation loans are loans that you take out to pay off small debts. You will be taking out a larger debt from a single creditor instead of having to pay multiple entities higher interest rates. This gives you the opportunity to overcome your debt by lowering the amount you owe.

However, it is very important to keep up with payments and never pay the minimum. But don’t fear there is also the benefit that you will have a single monthly payment. When you strike the balance between what you can afford and what you absolutely have to pay to make progress, you’ll be able to pay back debt and feel good about it.

Changing your mindset is so important. If you are going through debt that you can’t get a handle on, you need someone to show you that it is going to be okay. When you have a concise plan that works for you and your financial situation, the stress will be alleviated and your anxiety will go down. You will feel better and feeling better is crucial to seeing progress and keeping up with your payments.

How Can the Rockville Advisors Help?

The Rockville Advisors don’t just offer expert guidance when it comes to your debt consolidation plan, they will give you the peace of mind you need. They will show you understanding and care. The path forward will show you that you can do this if you stick to your payments and do your best to pay off what you owe every time you have the money.

A company like Rockville will keep you accountable but they will also be nice to you. They will empathize with your struggle and tell you everything is going to be okay. You will get better with their plan and guidance. Don’t let debt take over your life, get started today. 

Should You File for Bankruptcy? These Are The Telltale Signs That You Should

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In many ways, filing for bankruptcy can give you a fresh financial start, at least to a degree. However, it’s almost universally viewed as a last resort as the long-term impact of filing is significant. Additionally, filing for bankruptcy is a complex process, so much so that the mere idea can be overwhelming. But while there are consequences for moving forward, that doesn’t mean it isn’t the right move for many people. If you’re trying to decide if you should file for bankruptcy. Here are some telltale signs that maybe you should.

Telltale Signs That You Should File for Bankruptcy

You’re Using Debt to Pay Bills

If the only way to pay your bills – including general living expenses – is to use debt, filing for bankruptcy may be a wise move. When you have to use credit cards, payday loans, or personal loans to handle your daily life. You’re only getting deeper into debt with each passing month. This creates a cycle that can be difficult, if not impossible, to break on your own.

With bankruptcy, many unsecured debts can potentially be erased. This allows you to bring that vicious cycle to a halt. Essentially eliminating debts that you feasibly could never repay.

You Can’t Afford Your Minimum Payments

Once your minimum debt payments become unmanageable. You’re usually in an incredibly tough financial position. Missed payments commonly trigger fees, penalty interest rates, and other debt-increasing activities. This often makes a hard situation worse.

At times, missing a single payment on one debt may not mean bankruptcy is the best move. Sometimes, a shortfall is due to a situation that you know will pass. But, you may be able to catch back up.

However, if missing multiple payments is either already happening or likely to happen for the foreseeable future. Bankruptcy could be worth considering. Payments that are so unmanageable that you know you can’t handle them is a sign that you may be over your head financially, and bankruptcy could help you get back on your feet.

You’re Being Sued for Unpaid Debts

When traditional debt collection efforts fail, some creditors will take the next step and sue you for what’s owed. When this happens, you’re already in a tough situation. Often, heading to court to deal with the lawsuit means taking on additional expenses – such as hiring a lawyer or other court costs – making it financially unviable for many who are already struggling.

If you’re being sued for unpaid debts, filing for bankruptcy can pause those efforts. All collection activity legally has to stop while your case is being considered, giving you a reprieve. Plus, the outcome of your bankruptcy filing could erase many unsecured debts. If the lawsuit involves an unsecured debt, such as a credit card or personal loan, it could come to an end based on the bankruptcy decision.

You Can’t Escape Debt Collectors

Debt collection efforts can be intimidating and overwhelming. If you’re being hounded by debt collectors, receiving demanding phone calls and repeated aggressive letters, and you know you can’t pay off the debt, you might want to put bankruptcy on the table.

During bankruptcy, the accounts that are in collections may be eliminated. That will bring a permanent end to the calls, as well as let you have a fresher financial start.

You’re About to Lose Your Home or Car

Traditional home and auto loans are secured debts. The house or vehicle serves as a form of collateral, and the rules of the loan allow for the seizure of collateral under specific circumstances. If you fail to meet your repayment obligations, the lender has the ability to take action and potentially assert their claim on your home or car.

When you file for bankruptcy, any repossession efforts have to be temporarily halted. This can give you time to assess the situation without risking losing your house or vehicle.

Depending on the type of bankruptcy you file, these debts aren’t necessarily erased. However, you may be able to keep your home or vehicle if part of the decision includes revised repayment plans, allowing you to catch up on what you owe.

Now, it is important to note that even if a house or car is paid off, that doesn’t mean it can’t be at risk during a bankruptcy filing. The value of the property is compared to local exemption rates. If the value is high enough, your property may have to go toward settling debts. But if it is below the exemption, they are protected.

How to File for Bankruptcy

Once you’ve decided to file for bankruptcy, you want to move quickly. The bankruptcy process can be quite lengthy, for one. For another, the longer you wait, the longer you have to deal with a financial situation that’s harming you.

In most cases, getting a bankruptcy lawyer is a must. Since many attorneys require at least an initial payment upfront, you’ll either need to gather up enough cash to cover the fees or search for a pro bono lawyer. In some cases, legal aid centers can help low-income individuals or households access free or low-cost representation. However, many of these resources are overburdened, so there’s no guarantee you’ll get a pro bono bankruptcy lawyer.

Once you secure an attorney, you may need to go through credit counseling. There will also be other steps, like filing the paperwork and attending a meeting or two. However, if you have a lawyer, they will be able to walk you through the steps.

Type of Bankruptcy to File

Additionally, you’ll need to determine the type of bankruptcy you’ll be filing. Usually, Chapter 7 or Chapter 13 filings are the most common. Again, your attorney can help you assess each option, ensuring you move forward with the right approach based on your unique situation.

Ultimately, bankruptcy is a big financial step, one that will impact your financial life for years to come. However, while the hit to your credit score hurts, being able to refresh your financial situation could make it a worthwhile move if you’re already in deep.

Have you ever contemplated bankruptcy? Did you ultimately go through with it? If so, what was the tipping point for you? If not, what led you to change course? Share your thoughts in the comments below.

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What Happens if Debt Is Sold to a Collection Agency?

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When debt is sold to a collection agency, it’s incredibly common to get upset and/or worried. Odds are, you’ll start getting calls, emails, and text messages about you paying what’s owed.

In today’s post, we’ll discuss what leads to debt going to collections, what to do, what the collections agency can do, and what happens to your credit.

Why does debt go to collections?

Debt goes into collections when you’re behind a certain period of time (usually 30+ days) on your payment.

The lender will either use their own debt collectors or hire a third party to collect. What might also happen is your debt is sold to a collection agency, where they buy the debt from the lender (at a reduced amount than what you actually owe) and then attempt to collect on that amount.

Mortgages

With regard to mortgages, there are certain time periods to keep in mind:

  • 1 – 15 days – Typical grace period. Your payment must be paid in this period.
  • 16 30 days – You’ll start getting reminders, and you’ll likely pay a small late fee. No damage to your credit.
  • 31 – 59 days – Reminder calls and letters will increase. Your credit will reflect your current late status and your credit score will fall.
  • 60 – 90 days – The reminder calls and letters will stop. Someone from your lender will come to your house.

Read more on this subject, here.

What to do when your debt is sold to a collection agency

Don’t ignore it. The best thing you can do is get ahead of it. Gather information about the debt in question. Have them send it to you in writing.

Contact the creditor. Dispute it if you believe there are inaccuracies, or if it’s just not your debt. If it is your debt and everything is accurate, try to negotiate with the lender – they prefer to receive some of what you owe!

If the collection agency is harassing you, submit a request in writing for them to stop.

What if you’re at your wit’s end and don’t know what to do? Hire an attorney. All correspondence, going forward, has to go through them. If anything, get a consultation from an attorney (which is often offered for free) and see what they recommend.

What can they do?

When it comes to collections and the law, there are a few things they can do and several things they can’t do. If you want to know more about that, click here.

Your credit

There are two important things to know when it comes to collections and your credit report.

  1. A collection (or a charge off) hurts your credit score. Not only that, but your payment history (number one factor when calculating your score) will no longer be 100%, and that’s damaging as well.
  2. A collection will stay on your credit report for 7 years. You can implement strategies to improve your score, but you’ll only be able to do so much while that collection is on there.

Having a debt sold to a collection agency isn’t the end of the world. There are several things you can do to rectify it, dispute, or recover from it.

Related reading:

What You Need To Know About Bankruptcy

Deep Dive Into Credit Cards

What Affects Your Credit Score

What Are The Levels Of Wealth?

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There are several different ways to view wealth and the “levels” associated with it. Some people like to rank it in three tiers: not concerned with debt, not concerned with restaurant prices, and not concerned with spending on vacation.

I think this is a good place to start, but it can leave out some pretty important details.

In this article, we’ll break down our five levels of wealth, what they mean, and how you can identify where you sit.

Levels of wealth

As I mentioned in the introduction, we identified 5 levels of wealth. Below lists what those levels are, the details about them, and identifying characteristics.

  • Pay off debt and save
    • You can pay your bills. You may be paycheck to paycheck, depending on what you think that means, but you’re not falling behind. Liabilities are becoming less of a burden and your net worth is improving.
    • Development of habits – saving money and paying off debt. You’re probably wary of how much you spend on certain items, groceries, for example.
  • Increase savings and use investment vehicles
    • Your goals of paying off “high-interest” debt and establishing an emergency fund have been met. Your attention shifts to planning far ahead. Retirement savings and investing are your focus.
    • Saving at least 15% of your income for retirement and future goals. Automation implementation. Tracking net worth. Probably a little less concerned about your day to day spending.
  • Feeling comfortable and spending changes
    • You’re much less concerned about your discretionary spending. Though you’re less willing to spend money on stuff and more willing to spend money on experiences, and/or you’re encouraged to spend money on things that will create memories.
  • Financial freedom
    • You exceeded your goal net worth or nest egg number. Daily spending and discretionary purchases don’t register. You’re not concerned with how much you spend in most cases. Make sure, however, that how much you spend and how much you have actually makes sense from a mathematical perspective. There’s nothing worse than thinking you have more than you actually do. 
  • Philanthropy
    • One thing to keep in mind: make sure you are making memories and creating quality experiences before you get to this point, as well as after you get here. Time is limited. Make the most of it.
    • The quality of the experience matters more than the price. You shift your focus to using your wealth for good. How can you spend to make the world a better place?

What this all means for you

There are three things I would like you to walk away with from this article.

The first two steps in climbing the wealth ladder:

  1. Discern what level of wealth you are looking for, and what it specifically looks like for you. Everyone has different values and different wants, that means what your Financial Freedom looks like will differ from what Jane Smith’s level will look like.
  2. Craft a plan to get to your desired level. Figuring out what you want and what it looks like is great, but a goal without a plan or action is just a dream. Make it a reality.
  3. Financial wealth is great but should be viewed as a tool. It can also be viewed as a relief or peace of mind when you get to YOUR level. However, time is our most precious commodity. Truly wealthy individuals realize this truth and orient their lives accordingly.

Related reading:

Why Financial Literacy is Important

Your Wealth: What You Shouldn’t Do

Ways to Increase Your Wealth

Money Anxiety

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Money anxiety is not an official mental disorder but is often treated. It manifests itself in a variety of ways, but I want to explain how anxiety and money affect my own life.

As I’ve mentioned here before, I have diagnosed anxiety so my feelings and experiences may be amplified to what you feel.

When it comes to money anxiety, I experience it in a few different scenarios.

Pleasing people

Your willingness or ability to spend money in a relationship should not determine the strength of that relationship. If that’s the case, is that a relationship really worth having?

In my case, it’s directly correlated with my former spouse. She got dealt a few bad hands in life, so I was willing to spend beyond my means to make her happy. Not that the spending inherently would make her happy, it was more of a reluctance to say no due to financial constraints.

That inability to say no stuck me with debt that set me back on my personal finance journey. Obviously, there are other personal factors that resulted in these circumstances, but that’s the gist.

Fitting in

I’ll echo what I said in the first section, your willingness or ability to spend money in a relationship should not determine the strength or quality of that relationship.

Thankfully, I’ve learned from/outgrown this, but it used to be a real challenge for me. Growing up, I never really felt like I fit into a particular friend group. So I developed relationships that I’m thankful for now but otherwise appeared destructive.

Destructive from a personal and financial perspective. As I said, I’ve since outgrown that tendency, but it’s something to be aware of for yourself.

Long-term thinking

This section will specifically talk about my house. The one I’m currently renting. Before we bought that one, we were two years into a mortgage in a different city. The plan was to live there until my son was school-age, and then we’d move to a city with better schools.

The house we ended up buying, I found on a whim. We looked at it, loved it, and put in an offer. It stretched us SUPER thin from a financial perspective. I mean, exhausted all of our savings (including retirement), and we were incredibly close to being negative on our budget.

I knew in my heart that it was the right long-term decision, and I was willing to go through the pain/struggle in the short-term for it.

Little did I know that circumstances would change dramatically in the next year or two. Plan for the long term, but also plan for short-term variances (even the dramatic ones).

What I know

Because of my profession, my training, and what I’ve read, I’ve seen what happens when you make poor decisions.

That said, many (if not all) of my financial choices are heavily scrutinized. When I say “financial choices” I mean the larger ones. Day to day spending and bills are factored into my budget, though I do review (as you should) regularly to see where I can trim excess spending.

When I make a financial decision, my money anxiety kicks into gear, as I always second guess myself. I run through the possible scenarios that could play out.

Tim Ferriss calls it fear-setting. The Stoics call it premeditatio morum. It’s a practice of expecting the worst and planning for them as they will happen. Expect the worst, hope for the best. Not a bad thing to do, in money and in life.

My Last Reflection

The Importance of Being Handy

Related reading:

The Psychology of Money

My House and What Brought Me Here

Living with Anxiety and Depression

How Long Does Bankruptcy Stay on Credit Report?

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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

How to Answer a Civil Summons for Credit Card Debt

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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 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 – does the amount and the original lender match up? Is it yours?
  • Get 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.

  1. Try negotiating with the lender/collector again.
  2. Pay the amount mandated by the court
  3. Argue the ruling by filing an appeal
  4. File for bankruptcy
    1. 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

Ways Debt Can Hurt You

What Affects Your Credit Score

How To Pay Off Credit Card Debt

How My Finances Have Changed with Covid

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Aside from the death and illness, it has caused, Covid-19 has done a number on the financial system and the economy.

I’m writing this on May 19th, and up to this point, over 30 million people have filed for unemployment benefits.

In my previous post, which can be found here, I detailed how you can plan in the event of job loss.

Even if you haven’t lost your job, more than likely, your finances have changed. In this article, I want to pull back the curtain on how my finances have changed during this environment.

My Job

Thankfully, I’m still working. I work for my family’s business. Technically speaking, we have four family businesses and I work three out of the four in various capacities.

Two out of those three businesses are very resilient during recessions, so I’m not terribly worried about my income from those two sources.

The last, however, will be influenced by movements in the market. If I do my job well, it shouldn’t vary a ton, but if I don’t, my clients will feel the pain, as will I.

The reason being is I, typically, charge a percentage of the assets under management (AUM). If account values go down, so does the fee I receive. The two go hand in hand, as they should. If I do a poor job, I should make less. It just makes sense.

With that said, my income hasn’t moved too much from the financial advising gig. It dropped a little bit last month, but I imagine it’ll come back up by the end of May, as the market has recovered.

Opinion: The Economy

I don’t know if I’ve mentioned it yet here, but my opinion of the economy is darker than some. I think there will be a cascade of bankruptcies in the public and private sectors.

With regard to the public sector, the companies that are rated BBB are already at record highs. When revenues stop coming in or significantly reduce, it’s hard for companies to make interest payments to lenders (holders of debt).

Companies will start defaulting on their debts, and the ability to pay, as well as other factors, help determine the credit rating. This will cause a slew of BBB rated companies to get downgraded.

Funds

With regard to fixed income mutual funds and ETFs, the vast majority of them have rules they need to abide by. One of those rules could be only investing in investment-grade companies.

Investment grade is anything from AAA to BBB. My fear is that when companies get downgraded from BBB to BB, it’ll cause funds to dump those companies; exasperating the sell-off.

My Finances

With that said, here’s how I’ve adapted.

My finances really haven’t changed much. I’m spending more on groceries, especially right now as I am stocking up on certain goods. The added benefit of that is I’m spending less on food from restaurants, which saves me money and I’m eating healthier too.

So you’re spending more on groceries and less on take-out…what else? Well, given the nature of Covid and the uncertainty that surrounds it, my priorities have shifted a little.

More Cash

I’ve planned my clients’ portfolios with the above scenario in mind. The majority of clients aged 60 and up are positioned more conservatively than normal. With that in mind, all of the portfolios I manage will take a little hit, and my income will drop as a result.

I’ve suspended my retirement contributions, via payroll deduction, until I feel comfortable again. This may seem counterintuitive because of the stress I put on leaving things alone and dollar-cost-averaging as prices go lower.

Due to the fact that my income has some variability, not to mention my rental property and the uncertainty of my renters’ making rent payments (because of talks about forgiving rent payments for those affected by Covid), I have to keep more cash available than normal.

Retirement Contributions

As I mentioned, I stopped my automatic retirement contributions, but I am making voluntary contributions to my Roth IRA when I feel my cash available is adequate.

Other than that, nothing else has changed. Debt payments will continue as planned and saving for a down payment on a house will also continue.

Be advised: Any opinion expressed about the market/economy is strictly an opinion and should not be viewed as a certainty. Additionally, my preparations for said opinions are specific to me. Consult your financial professional about your particular situation.

Related Reading:

Why Asset Allocation Matters

What You Can Learn From Different Market Environments

Job Loss: What To Do

Dealing With Market Fluctuations