Bankruptcy Questions Answered

Understanding the Changed U.S. Debt Outlook Rating

The credit rating agency Standard & Poor’s made waves last week when it announced that it had downgraded the outlook on U.S. debt from “stable” to “negative,” leaving many ordinary Americans wondering what the change means for the economy and how debt rating works in the first place.

Here’s a look at what our country’s debt rating might mean in future months and how that rating is like an individual credit score.

Rating the U.S. Debt

Currently, the United States has a credit rating of AAA, which is the highest rating possible. This rating indicates that the U.S. is a stable country and is likely to repay any loans it takes out. But there’s more to the story.

• Outlook on U.S. debt: While the other two major credit rating agencies (Moody’s and Fitch Ratings) have not announced any changes to their ratings on the outlook for U.S. debt, Standard & Poor’s downgraded that rating last week, citing as one reason the continued inability of Congress to make a decision regarding the long-term future of spending policies.
• A warning move: While the change in the outlook rating does not officially alter the country’s credit rating, it serves as a warning and reminder to legislators and others in positions of power that the country’s financial stability and credibility on the world stage are at stake.
• Potential for positive impact: Some commentators have mentioned that the changed credit rating could actually prove beneficial to the country, as it may push Congress to act swiftly (and without unnecessary political posturing) in taking steps toward changing financial policy.

The Parallel with Individual Credit Ratings

As anyone who has ever file for bankruptcy, applied for a mortgage or thought about borrowing money for a car knows, individuals have credit ratings too. And, as with the credit rating for the United States, credit ratings for individuals are used to help lenders and investors determine whether or not to lend money to a person and on what terms.

If Standard & Poor’s actually downgraded the country’s credit rating, it would have a similar effect on the nation as seeing a drop in a credit score would for an individual. In other words, the U.S. would have more difficulty borrowing money and could suffer a variety of financial consequences.

So how can a country (or an individual) keep its credit rating as strong as possible?

• Pay bills on time.
• Pay down as much debt as possible.
• Try to keep credit usage low (that is, stay well below the limit).
• Keep old accounts active (but not maxed out).
• Contact creditors before bill due dates if there is ever reason to expect inability to make timely payments.

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Identity Theft & Taxes: What the IRS Recommends

In the wake of tax season, the Internal Revenue Service has issued a statement warning Americans about how to spot and rectify identity theft that may affect their taxes. Identity theft can be a difficult crime to deal with, and can cost victims hours of time and even money to repair.

Here’s a look at what you need to know about identity theft and your taxes.

• The IRS does not initiate contact by email. If you receive an email from someone claiming to be the IRS, report it as spam and do not click on any links or provide any of your personal information.
• Pay attention to any snail mail contact. If the IRS contacts you by postal mail and indicates that multiple tax forms were filed in your name or that records show you received wages from an employer you don’t know, you should suspect possible identity theft.
• Contact the IRS. If and when you receive a notice from the IRS by mail that indicates unusual or suspicious activity, you should contact the IRS by responding to the address or number provided on the form you received.
• Check your credit report. If you’re interested in knowing more about whether your identity might be at risk, visit www.AnnualCeditReport.com to check your credit report for any suspicious activity. You are entitled to view a credit report from each of the three major reporting bureaus for free once per year.

It’s best to act quickly if you suspect identity theft related to your taxes, because if someone else filed a tax return in your name (or using your Social Security Number), that person could be eligible for a return – and you might not get one.

Online Resources to Protect Yourself

One of the best ways to combat identity theft is to prevent it. And, seeing as identity theft can cost serious money (and even triggers bankruptcy filings for some victims), it’s never too soon to start protecting yourself, your sensitive information and your money.

The Federal Trade Commission, the IRS and a number of other government organizations have teamed up to create the web site OnGuardOnline.gov, which offers information, tools and tips for staying safe in the digital world.

The site’s online resources include:

• Detailed instructions for dealing with identity theft (tax-related or otherwise);
• Pointers for keeping your information, accounts and passwords safe at WiFi hotspots;
• A number of games designed to educate users about various digital risks and how to protect against them;
• Informative videos that include expert interviews and how-tos designed to help people stay on top of digital and cyber safety; and
• Tools to use to protect yourself in your everyday life.

Posted in Credit Report, Identity Theft, Legal Info, Taxes, prevent identity theft | Comments Off

New Solutions for Those with Mortgage Woes?

These days, many Americans are desperate to stay on top of mortgage payments, and are considering unorthodox ways to pay the bills. apparently, when a company called Adzookie offered to pay people’s mortgages for up to a year if those people would display large advertisements on their homes, applications flooded in by the thousands, as a recent report from Credit.com details.

The deal reportedly works like this: if you apply and are accepted into the program, Adzookie will paint advertisements on your home and pay your mortgage for three months (with a chance to renew for another nine if the ads remain in place).

While that may sound like heaven to some struggling homeowners, only a handful of people will be selected for this deal. So what can the rest of us do?

Finding Affordable Housing

Because of the tight standards of many refinancing programs, few homeowners are able to qualify. So that might mean a few things, one of which could be giving up a mortgage (whether with the help of personal bankruptcy or not) and renting for a while.

So how can you find affordable rent? By following these steps for negotiating:

• Know the area: Figure out what people are paying for apartments in the neighborhood you want. In addition, try to determine whether there are more apartments than tenants or vice versa. If there are lots of vacancies, you have a better chance of negotiating a deal. You can do this by scouring local postings and asking people who rent nearby.
• Consider amenities: Determine whether your potential apartment is bare-bones or all-inclusive. The former may provide you better negotiation opportunities, but make sure you’re able to find necessary services nearby—if you have to haul your laundry across town every time you’ve got dirty clothes, a small rent savings might not seem worthwhile in the long run.
• Prove yourself: Offer to show to a potential landlord a strong credit report, a reference from a previous landlord or proof of steady income. A landlord who views you as a good credit risk is more likely to cut you a deal because she’ll be less likely to have to chase you down for rent or lose money on you.
• Think outside the box: Offering to sign a lease longer than one year (which saves a landlord the work of finding new tenants), pay ahead of the due date (which saves a landlord worry and possibly money loss) or move in whenever works best for a landlord can all give you leverage in negotiations, as all these circumstances tend to ease a landlord’s financial (and worry) load.

Posted in Bankruptcy and the Economy, Credit Report, Foreclosure, Mortgage Foreclosure | Comments Off

Take Time for a Financial Tune-Up

Many people know that it's important to maintain healthy credit, particularly in a bad economy. But “maintaining good credit” is a vague concept at best. Here’s a look at some concrete steps you can take to improve your finances—even if you only have a few minutes to spare.

Fifteen-Minute Finance Boosters

This post from WalletPop.com outlines a few ways you can bolster your financial situation in a mere quarter hour. Here’s a look at the suggestions.

• Set up an emergency fund: Most experts advise having some money set aside for unexpected expenses (like car repair, illness or even job loss). This can be as easy as figuring out how much money you’d like to have in your fund (experts generally recommend anywhere from three months’ to one year’s expenses), setting up a high-interest savings account and starting regular contributions.
• Look at your credit report: One essential part of maintaining healthy finances is keeping current with how the authorities view you as a credit risk. And, thanks to the Fair Credit Reporting Act, doing so is as easy as visiting www.annualcreditreport.com and following the prompts. All Americans are entitled to one report per year from each of the big three reporting bureaus. If you space them out, you could check up on your credit once every four months.
• Review your bills: Take a look at the goods and services you pay for each month (utilities, cable, phone, insurance, etc.). Then do a little research online or by calling your providers and see if you can get a better deal somewhere else (or from your current provider). Bonus: the money you save each month can be funneled into your emergency fund.
• Draw a map: In order to stay on top of your finances, you should be able to understand them fairly easily. Take out a sheet of paper and outline your accounts, debts and credit cards. Making a visual representation of your finances should help you see any unnecessary duplications and help you determine what you can eliminate to streamline things.
• Think about retirement: Even if you already have a retirement account through your job, you can start a Roth IRA, which would grow tax-free. The government has instituted contribution limits, though, so do a little research before you commit.

One of the most important things to remember about improving and maintaining your finances is that you don’t have to do everything at once. A little work at a time can make a big difference in the long run.

Additional Resources

Fair Credit Reporting Act

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Bankruptcy Credit Report Questions Answered

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