Are you wondering, “What is a Chapter 13 bankruptcy?” Look no further, as this blog contains all the information you need to get about this bankruptcy process. So, basically, it is a process that safeguards people who are overburdened with debt but do not have sufficient income to make complete or even a partial repayment to their creditors. It is also known as reorganization bankruptcy and calls for making monthly payments for three or five years, after which most of the outstanding debts are canceled. Here is how this bankruptcy works:

How Does Chapter 13 Work?

Chapter 13 enables individuals, businesses, and married couples who cannot pay their debts to wipe their slate clean. Like various other forms of bankruptcy protection, Chapter 13 protects debtors from wage garnishment, lawsuits, and other methods that creditors might use to collect outstanding debts. Chapter 13 can ultimately free you from different debts, but some obligations cannot be discharged.

This form of bankruptcy is proposed for couples and individuals with enough financial resources to make full or even partial repayments to creditors with time. Resources might include assets that can be sold to satisfy disposable income and debts. Chapter 13 repayment plans will limit your monthly payments to lesser than 15% of your disposable income.

Understanding Chapter 13 Payment Plans

The bankruptcy court determines the specifics of a Chapter 13 repayment plan. It is based in part on a means test that individuals must complete during their bankruptcy process. The means test will compare your living costs and earnings to the median income as well as expenses for other households that are the same size as yours within your community. If your income is equal to or lesser than the local median amount, your case will be considered a hardship. Consequently, you will be assigned to make repayments over a commitment period or a three-year span. Otherwise, you will be assigned a five-year commitment period. The means test also measures your disposable income and sets the monthly payments the court will collect to repay your creditors.

Which Debts Can Be Discharged In Chapter 13 Bankruptcy?

Here is a table that sets what debts can be discharged and what cannot be discharged after completing a Chapter 13 repayment plan:

Debts That Can Be Discharged:

• Medical debt
• Past-due rent
• Personal loans  
• Credit card debt
• Past-due utility and cellphone bills

Debts That Cannot Be Discharged:

• Criminal fines
• Mortgage debt
• Certain unpaid taxes
• Past-due alimony or child support
• Federal student loans

How To Qualify For Chapter 13 Bankruptcy

In order to be eligible for filing for Chapter 13 bankruptcy repayment plan, you must have the following:

1. Total debts less than $2.75 million
2. Regular income
3. Submitted federal tax returns (and state returns, if applicable) for the four years preceding your bankruptcy filing and paid all taxes associated with those returns.

How To File Chapter 13 Bankruptcy

Here are the steps that you will have to take for a Chapter 13 bankruptcy procedure:

Prepare Ahead Of Filing

Prior to officially filing for bankruptcy, you will want to find a bankruptcy attorney (if you are going to use one), fill out all the necessary paperwork, and take a court-approved credit counseling course at least six months before you file.

File Paperwork

When you or your counsel submit your completed paperwork and filing fee, your case gets opened. If you are wondering, “How much is Chapter 13 bankruptcy?” then the filing fee for such bankruptcy is only $313. Creditors immediately get barred from seeking additional payment, and foreclosure is stopped.  

Trustee Notified

Within a few days of filing, the court will alert you via mail that a Chapter 13 trustee has been named to administer your case. You and your creditors also will be notified about routine meetings and deadlines for filing claims with the court.

Begin Monthly Payments

Even though your repayment plan will not have been finalized, you are expected to start making payments on your Chapter 13 repayment plan within a month of filing.

Prepare To Meet With Creditors

You must give the trustee all requested documents at least one week prior to your scheduled meeting with creditors. These include pay stubs, bank statements, four years of tax returns, and financial documentation such as loan balances, retirement, and bank account holdings, as well as business expenses (if you are self-employed or own a business) and income.

Meet With Creditors

Within 40 days of filing Chapter 13, the trustee will summon a meeting (known as 341 meetings) during which the creditors and trustee who attend can inquire about your finances. You must bring all the documents that the trustee requests and proof that you have filed tax returns for the past four years.

Adjust The Plan (As Necessary)

If objections to your Chapter 13 plan are raised at the 341 meeting, you and your attorney must work with the trustee to alter the plan as required. This might be done by informal agreement with the trustee but sometimes needs a ruling by the court.

Creditors Make Claims

In 70 days of filing, or within 180 days for government creditors, creditors must file proof of their claims with the court in the form of unpaid bills, contracts, and other supporting documents. If a creditor does not file a proof of claim by the deadline, you can do it for them within 30 days.

Respond To Creditor Claims

If you do not agree with the amount or nature of a creditor’s claim, your attorney or you must notify the court at your first priority. Make sure to provide supporting evidence (i.e., proof of payment and the like).

Confirmation Hearing

Within 40 days of the “341 hearing,” the court holds a confirmation hearing to review your proposed plan, as well as any objections raised by the trustee or the creditors, prior to deciding whether to confirm your repayment plan.

Finalize Repayment Plan

If the court approves your plan, you will continue making your payments. The court may extend the confirmation to give you and the trustee time to modify your plan prior to agreeing on a final payment amount. Meanwhile, keep making payments per your original plan.

Track Creditor Payments

Keep an eye on the regular creditor payment statements the trustee offers and pay any late fees assessed on car payments or late mortgages.

Final Paperwork

Prior to making your final payment under the Chapter 13 bankruptcy plan, you must offer the court proof that you have completed a debtor education course.

Bankruptcy Discharge

Once you have completed all payments, the court will grant your bankruptcy discharge. It will cancel all the remaining balances of qualifying debts.

How Long Is A Chapter 13 Bankruptcy?

Typically, Chapter 13 bankruptcy takes about three to five years. During this time, you will be on a repayment plan to repay some or a portion of your debts. There are a bunch of factors that will determine how long your plan is going to last, including your income. If you wish to keep track of your scores, then contact genuine credit score services, such as Gifted Financial Services, to get your reports. 

The Bottom Line

The decision to file Chapter 13 bankruptcy is never an easy one, but the process can offer much-needed relief from the constant anxiety that comes with debt collectors and unpaid bills while allowing you to keep your home as well as other assets. While the bankruptcy will stay on your reports for up to seven years, you can start rebuilding your credit by making payments on time. This factor influences my credit score the most. During the entire bankruptcy process, it is vital that you monitor your credit score and reports to make sure that you are on the right track to rebuild your credit once your bankruptcy is complete. With these Chapter 13 tips and tricks, we hope you make wiser decisions to ensure your financial well-being. 

Chapter 7 (Liquidation) is a common form of bankruptcy. It is available to people who cannot make regular payments towards their debt. Businesses opting to terminate their enterprises might also file Chapter 7. This bankruptcy offers relief to debtors irrespective of the amount of debt owed or whether a debtor is insolvent or solvent. A Chapter 7 Trustee is allotted to convert the debtor’s assets into cash to distribute among creditors.

In order to take full advantage of these bankruptcy laws and get a fresh start, it is crucial that you do not keep on incurring additional debt. If all or a chunk of the reason you are filing bankruptcy is overdue federal tax debts, you might need to elevate your withholding and/or your estimated tax payments. In this blog, we will uncover some important information about how to file Chapter 7 and what it is exactly. So, let us go!

What Is A Chapter 7 Bankruptcy?

Chapter 7 is also known as “Liquidation” or “Straight Bankruptcy.” Here, a list of all your assets and debts is filed with the bankruptcy court. The court will assign a “trustee” to display the interests of your creditors who can sell your assets to pay debts. However, in many Chapter 7 cases, your property will be “exempt” by law. It cannot be sold to satisfy the claims of the creditors. When your bankruptcy case is over “final discharge,” almost all of your debts will be erased.

What Is The “Means Test”?

Everyone who files for bankruptcy under Chapter 7 must take a “means test.” This test is a formula-based screening tool to check if you qualify for Chapter 13 (repayment plan) or Chapter 7 (debt liquidation). You do not have to be poor to file for Chapter 7. If you are someone with a higher income, you can also qualify for it if you have high expenses, such as high mortgage payments.

How Does Filing For Bankruptcy Chapter 7 Affect My Credit?

A Chapter 7 bankruptcy generally stays on a person’s credit report for more than ten years from the date the case was filed. On the other hand, the negative accounts stay on their report for only seven years. If you are considering going for bankruptcy, then your credit must already be in bad shape. Review your credit report for free by signing up at Gifted Financial Services. Here, you can see your credit reports from the three major credit bureaus. A bankruptcy notation on your reports will alert any future creditors that you did not pay your debts on time. Restoring bad credit after this bankruptcy will take a lot of your precious time and effort.

Also Read: How To Improve Your Credit Score

What Can A Chapter 7 Bankruptcy Do?

A Chapter 7 Bankruptcy can:

1. Allow you to catch up on missed payments and stop foreclosure on your home
2. Put an end to collection harassment
3. Stop the seizure of your property or car. In some situations, it also forces the creditor to return the property even after it has been reclaimed.
4. Eliminate the legal obligation to pay all or the majority of your debts; it is known as the “discharge” of debts.
5. Prevent or restore the termination of your utilities for not paying previous bills.
6. Restore your driver’s license if it got suspended due to you not being able to pay court-ordered damages for any driving accident (unless it involved any “Driving under the influence – DUI”)

 

What Can’t Be Done Through Bankruptcy Chapter 7?

Now that we know what you can achieve with a Chapter 7 bankruptcy, it would be wiser to know what you cannot do with it. So, here is a list:

1. Protects you from “hot check” or various other criminal charges. It cannot waive fees, criminal fines, restitution, and penalties
2. Discharge past-due child-support, recent IRS debts, most student loans, and property taxes
3. Eradicate the obligation of a co-signer on your loan; in many cases
4. Discharge debts that arise after you file for bankruptcy
5. Eliminate the rights of the creditor to secured property, including home mortgages and car loans. Chapter 7 can discharge the debt but not the creditor’s legal claim or lien. After bankruptcy, your car can be repossessed. Similarly, your house can still be foreclosed if you do not make the payments

Are There Alternatives To Bankruptcy?

There might be alternatives to bankruptcy. For further clarification, we suggest you discuss this matter with your lawyer prior to deciding how to move forward. Doing nothing can also be a suitable option if your case is judgment-proof. If your income and property are by law exempt from claims of the creditor, then you have nothing those creditors can take away from you. With the exception of past due child support, you cannot be put behind bars for not being able to pay a debt. However, if you are not judgment-proof, then you can negotiate a payment agreement with your creditors prior to filing for bankruptcy.

Have An Attorney Guide You Through The Chapter 7 Bankruptcy Process

Deciding all of this can be pretty challenging. Thus, prior to filing any papers, we recommend you seek help from a Chapter 7 bankruptcy attorney who has vast experience in the field. They will advise you on whatever is in your best interest. These attorneys will also walk you through the entire process so you will know what you can expect.

Pros And Cons Of Chapter 7 Bankruptcy

The below-given list of Chapter 7 bankruptcy highlights the advantages and disadvantages. It will help you decide which option is best for you. 

Advantages of Chapter 7:

• If you are confused about “how long does a Chapter 7 take,” then it is only going to take three to six months to complete. Once it is done, you will enjoy the relief you desperately require from the majority of your debt.
• State exemptions might permit you to preserve most of your property. You also get to keep any property that you acquire or income that you earn after filing for bankruptcy.
• You might be able to get new lines of credit within one to three years of filing bankruptcy.
• Some lenders specialize in lending and home buying for individuals after bankruptcy.

Disadvantages of Chapter 7:

• A Chapter 7 bankruptcy is going to stay on your reports for more than ten years.
• You will lose your property that is not exempted from sale by the bankruptcy trustee. Moreover, you might also lose some of your luxury possessions.
• You would not be able to use all your credit cards where you owe money.
• Bankruptcy is going to make it almost impossible for you to get a mortgage for a while if you do not already have one.

Who Qualifies For Chapter 7 Bankruptcy?

There are a few requirements that you must meet in order to file for Chapter 7 bankruptcy. Continue reading to find out more about them:

Credit Counseling

Generally, you must complete a group or even an individual credit counseling course from an approved credit counseling agency within 180 days prior to filing.

Income Limits

You must pass the means test or the average of your monthly income in the last six months must be less than the median income for a household of the same size in your state. A bankruptcy means test will determine if your disposable income is enough to make partial payments to creditors. Suppose you do not pass the test, then worry not. You will still be able to file for Chapter 13 bankruptcy.

No Recent Bankruptcies

You cannot have filed a Chapter 13 bankruptcy during the last six years or a Chapter 7 bankruptcy during the last eight years. If you tried to file a Chapter 7 or 13 bankruptcy and your case got dismissed, you will have to wait for at least 181 days prior to trying again.

No Fraud

You might be eligible to file, but a court can dismiss your case if it concludes that you are trying to defraud your creditors. For instance, if you use credit cards or take out a loan while intending to declare bankruptcy to avoid repaying the debt.

The Bottom Line

By reading the information given above, you are now aware of what is Chapter 7 bankruptcy. It allows businesses and individuals to eliminate most unsecured debts by liquidating non-exempt assets, with a trustee appointed by the court overseeing the entire process. Debtors can retain exempt assets, while non-exempt assets are sold to pay off the debt.

Businesses maintain a proprietorship over a number of different properties, each having its own function and type. It is essential to keep tabs on these properties and manage them, as your business is most likely to have a massive range of needs. Each of these needs can be satisfied by a specific asset or property. An asset is primarily anything that a business considers to be of financial value or owns it. 

Now, these assets can be grouped into two different categories based on how easily they can be converted into cash. These groups are liquid assets and non-liquid assets. To set both of these groups apart, it is mandatory to know what they are, what they mean for a company, and how to use them to gain benefits. You must have answers to these questions if you are willing to get the best out of your owned properties. In order to get these answers, let us look in detail at the non-liquid assets and liquid assets definition.

What Are Liquid Assets?

Liquid assets can be easily and immediately converted into cash with little to no loss in their value. As they can be accessed quickly, they are central to maintaining some financial flexibility. Liquid assets are the ones that are available to manage unexpected expenses, take benefit of investment opportunities, and meet financial obligations. Let us look at a list of these assets:

List Of Liquid Assets 

Some of the popular examples of liquid assets are: 

1. Cash

Cash is the most liquid asset as it is readily available always.

2. Checking And Savings Accounts

With only a withdrawal or transfer, you can easily access your savings or checking accounts easily and quickly. 

3. Stocks And Bonds

If you were wondering, “Are stocks liquid assets or not?” then here is your answer: they are! You can sell them along with other securities on the open market with little delay. Even though there is some risk of losing your initial investment, but nonetheless, they are considered liquid assets. 

4. Money Market Funds

These funds have liquidity that is more like that of a savings account. However, it might offer slightly higher returns. 

5. Certificates Of Deposit (CDs)

Based on the terms, some certificates of deposit can be liquidated before they reach maturity. However, early withdrawal penalties might put some restrictions on their liquidity. 

What Are Non-Liquid Assets?

Far from liquid assets, non-liquid assets cannot be inexpensively and quickly converted into cash. Most of the time, the investors hold such assets for longer-term investment purposes, i.e., income generation or price appreciation. While such assets serve significant purposes in investing, they hinder flexibility in the shorter run. Selling non-liquid assets mostly needs significant effort and time, making them unsuited for covering rapid financial requirements. When such assets are converted into cash, there is also potential for significant upfront costs and even loss of initial investments. 

What Are The Examples Of Non-Liquid Assets?

Below, we have discussed some major examples of non-liquid assets: 

1. Real Estate

Mostly, it takes a few weeks to months to close a sale on a commercial or even residential property. Getting it ready for listing might also require you to make costly upgrades or repairs to the property. 

2. Retirement Accounts

Generally, you cannot access funds in an IRA, 401 (k), and accounts that are similar to it prior to getting to retirement age without paying any penalty. 

3. Private Equity

Proprietorship shares in private companies are usually tied up for extended time periods. Particular conditions might also be required in order to liquidate them. 

4. Collectibles

Turning jewelry, art, and related assets into cash might also take some time. Moreover, it also requires specialized auctions or markets. 

5. Business Interests

Proprietorship in any business is not conveniently sold, and coming up with a genuine buyer can also be a time-consuming process. 

Why Does Asset Liquidity Matter To Your Business?

Liquidity is crucial to any business due to a lot of different factors. Below, we have discussed some of the most significant reasons:

1. Keep A Check On Your Financial Health

Although cash is vital for any company to manage its financial responsibilities, a lot of it can hamper future investment opportunities. Keeping the liquidity in check can assist you in striking the perfect balance and keeping only the amount of cash you require. 

2. Helps Secure Loans And Other Funding

The ratios of liquidity are crucial to banks when they determine the ability of the business to repay the debts. 

3. Aids In Comparing And Gauging Performance

By keeping tabs on the liquidity of your competitors, you can also keep track of how you are performing in contrast to them. 

4. Helps Handle Operational Costs

The liquidity status of your business also determines how many resources you have available to manage your day-to-day operational costs. 

5. Helps Mitigate Emergencies

Liquidity status also aids you in keeping an eye on how many resources you have at your disposal in any case of emergency. 

To Sum It All Up!

Liquid money offers the security and flexibility required to tackle unexpected events as well as daily expenses. On the other hand, non-liquid assets provide the potential for long-term income and growth. The key is to balance non-liquid assets and liquid assets in your investment portfolio. By doing so, you will not only be able to manage your current finances, but you will also prepare for your financial future.

Getting medical care is undoubtedly a crucial part of staying healthy. However, expensive medical bills can seriously strain your bank accounts and result in a bad credit score. Medical debts can also have a negative impact on your credit score because the debt has already been sent to collections by the time it starts to show on your credit report. Even if you are making payments actively on the debt, having an account in collections can have a bad impact on your credit score.

Your medical debt might affect your credit scores, but not always. If you have missed multiple payments and your healthcare provider sells your debt to a collection agency, then these bills can hurt your credit. Here is what you need to learn about medical bills and how they can impact your scores. In addition to that, we have given some tips to help you tackle them. So, let us get started:

Medical Bills And Credit Report | Do They Affect Your Scores? 

Medical bills will not influence your credit as long as you pay them on time. However, unpaid medical debts are tackled a bit differently than other types of debt. Because most healthcare experts do not report to credit bureaus, your debt would have to be sold to a collection agency prior to it appearing on your credit report. Many medical professionals would not sell the debt to a collection agency until you are 60, 90, and even 120 or more days past the due date. The exact time varies depending on your medical care provider. 

Even after your bills go to collections, the account will not show up on your credit report straight away. The major consumer credit bureaus, TransUnion, Experian, and Equifax, provide a 365-day waiting period to fix any medical debt. After that, the collection account starts to show on my credit score history. So, medical bills will not influence your credit score right away if they are not paid or even if you pay them within a year. If the initial reported collection account balance is less than $500, the account will not show on your reports. Moreover, it will also not impact your scores. 

However, this does not mean that you should ignore a medical bill. Unpaid bills might take a long time to show up on your report. But, the damage to your credit scores can be long-lasting as soon as they start showing up on your scores. Unpaid medical collection accounts of more than $500 can stay on your reports for seven years. It can make it challenging for you to keep up with your credit score ranges. However, once you pay them, they will not show on your reports anymore. 

Can Medical Bills Be Removed From My Credit Report?

Insurance companies and medical billers commit mistakes, and fraudsters might steal your identity to get medical care. If you have medical collections on your report that are not correct or are the result of any fraud, then you have the right to contact the credit bureaus. 

Apart from them, you can also seek help from genuine credit score services, such as Gifted Financial Services, to dispute these issues. If the dispute is settled in your favor, then the accounts can be removed or updated from your report. 

You can file these disputes for free. However, you need to be prepared to give evidence of your claim. For instance, you might need records from the insurance company, collection agency, or even your medical-care provider, a credit card statement, or copies of canceled checks displaying that you have paid the bill. 

Do Medical Bills Affect Your Credit Scores?

It is always a great idea to pay off any legitimate medical debt. And, when it narrows down to your credit scores, it can make a huge difference. Unpaid collection accounts that are more than $500 can show on your reports and impact your credit scores for about seven years or so. However, when you or your insurance company pay off a bill that was in collections and report it to the bureaus, the account will be removed from your reports. If it still stays there, you can get services, such as Credit Breeze from Gifted Financial Services, to resolve any issues with your credit scores. This will have an immediate positive impact on your report. 

What To Do If You Cannot Pay Your Medical Bills On Time?

If you know you will not be able to make timely medical bill payments, then you need not to worry. In order to solve this issue, we have given some of the options below:

Try To Negotiate Your Medical Bills

Medical care experts are mostly willing to work with their patients. This is because they would rather get some portion of what they are owed than get nothing at all. Say, for instance, many professionals offer considerable discounts if you make a huge payment and then pay the rest with time, or even agree to pay a lower amount in full. 

Try To Work Out A Repayment Plan

Your healthcare expert might be willing to break down your total bill into monthly payments, which might make it a bit more manageable for your budget. Just keep in mind that any fees or interest the provider charges will add to the cost of the original bill. 

Use A Credit Card Or Personal Loan

These options must be your last resort, as you will get interest on whatever amount you charge or borrow. Do not get a loan secured by your home or any other assets, as you might lose them if you default. If you are planning to use your credit card, then a card with a lengthy 0% APR introductory offer on your purchases can give you some extra time to pay off your medical debt without paying interest, but make it a goal to pay off the debt prior to the higher rate kicks in. You can hire online credit score monitoring services, such as Gifted Financial Services, to keep track of your scores. 

Hire A Medical Billing Advocate

Medical billing advocates work with insurance companies and healthcare providers to help resolve bills on people’s behalf. The service is not free. However, it is totally worth the cost. A medical billing advocate can help you save thousands of dollars. Moreover, they also save you hours of time that you would have spent on the phone with provider offices and insurers. 

Figure Out If You Qualify For Financial Aid

On the basis of your income, you might be able to get help paying medical bills from state or local programs, non-profit organizations, charities, and even religious groups. 

Summing It All Up

Even if you have a collection account on your report, there are a few things you can do to improve your credit score. Make all your debt payments timely, avoid applying for new credit unless you really need it, and keep your credit card balances low. Keep an eye on your credit by checking your credit score and report regularly. Be attentive to your score risk factors so you can make alterations that will help you improve your credit score.

Paying off your debts mostly helps enhance your credit scores. However, this is not always the case. It is possible that you can see your credit scores drop after fulfilling your payment obligations on credit card debt or a loan.

However, it does not mean that you should ignore what you owe. The perks of paying your debts are far greater than the drop that you might see in your scores. If you are wondering, “Should I pay off closed accounts on credit report or not, then you must read on. Starting with…

What Elements Affect Your Credit Scores?

In order to understand why you see lower credit scores after paying off debt, consider the elements that go into computing your credit scores. Your scores are dependent on the information from your credit reports, which are produced by each of the three nationwide consumer reporting agencies (CRAs). These CRAs – TransUnion, Experian, and Equifax – get information about your lines of credit, i.e., credit cards, personal loans, and mortgage and auto loans.

Your scores are then calculated based on a formula that determines how likely you are to make your debt payments on a timely basis or your creditworthiness. Credit scores are some factors that lenders might consider when deciding whether to extend credit to you. There are many formulas used to calculate scores. However, a lot of them consider some factors, such as:

Payment History

Your payment history reveals how you have paid off credit in the past. Some behaviors, such as missed or late payments, can negatively impact your scores.  

Length Of Credit History

Your credit reports trace the amount of time your accounts have been active. A longer credit history can positively impact your scores.

Newer Lines Of Credit

Any recent credit accounts you have opened are also taken into consideration while calculating your scores.

Credit Mix

The mix of your credit accounts, including credit cards, mortgages, and loans – is generally taken into consideration when calculating your scores, and a diverse credit portfolio can have a promising impact.

Credit Utilization Ratio

The amount of revolving credit you are using is divided by the total credit you have available (credit utilization ratio). Moreover, it can also affect your scores.

Why Your Credit Scores Might Drop After Paying Off Debts?

Paying off debt may reduce your credit scores if removing the debt influences certain factors, i.e., your credit mix, the length of your credit history, and your credit utilization ratio. For instance, paying off only installment loans, i.e., a mortgage or auto loan, can impact your scores negatively by reducing the diversity of your credit mix. Creditors prefer to see that you can manage different types of debts. Paying off your only line of installment credit decreases your credit mix and might ultimately decrease your scores.

Similarly, if you pay off a credit card debt and close off your account, your scores might drop. This is due to your total credit available being lowered when you close a line of credit. It results in a higher credit utilization ratio. Moreover, if the account you closed was your oldest line of credit, it might negatively affect the length of your credit history and cause a drop in your scores.

When Will Your Credit Scores Improve After Paying Off Debts?

Paying off debt is more likely to help your scores than to hurt them. You will see your credit scores elevate after paying off debt unless the debt you repaid meets the unique criteria given above.

How Long After Paying Off Debt Will Your Credit Scores Change?

Generally, the nationwide CRAs get new information from your lenders and creditors every 30 to 45 days. If you recently have paid your debt, then it might take somewhere around a month or so to see any changes in your scores. You can check your scores by signing up at Gifted Financial Services. Here, you will be able to see reports from all three major credit bureaus side by side.

What Happens If I Stop Paying My Credit Cards?

In some cases, your scores might slightly dip from paying off debt, but that does not mean you should ever ignore what you owe. Speaking generally, the damage to your credit scores that result from paying off debt is least likely to be permanent. It is always a great idea to keep up with your debt payments and repay what you owe. The long-term perks to your scores and the ability to live debt-free are totally worth it.

To Sum It All Up!

It might seem like paying off debt is a bad course of action as it can negatively influence your credit score. However, this cannot be far from the mark. Yes, there are some times when your score takes some hit when you pay the debt in full. This dip (only a handful of points) is only temporary. For a lot of individuals who have an on-time payment history, minimal new inquiries, and low credit utilization in contrast to their credit limits, scores get back to the level they were within a few months after paying off a debt.

You need to be very patient throughout the entire process. A few-point drop in your scores due to paying off debt is a temporary bump in the road. In only a few months, you will see the positive impacts of your debt payoff that far overshadow the short-term and restricted impacts.

If you are seeking to take out an auto loan or buy a new home, you might be checking your credit score every other day leading up to your application to see where it stands. But only because you check it often does not mean there is going to be an update.

Credit scores refresh at various times throughout the month, and there might be times when it takes a bunch of days or weeks before your score updates. And even if you check it today and go to apply for a credit card or loan tomorrow, your score might change. If you are thinking about when does your credit score update, then you must read on. Here are when you can expect your scores to update and where you can check them for free:

How Often Does Your Credit Score Update?

There are three major credit bureaus: Equifax, TransUnion, and Experian. When your lenders report your credit activity and loan, your credit report gets updated with new information. But this is not done in real time. To ensure the date is valid, the bureaus go through a process. It can take anywhere from a couple of hours to a bunch of days. If there is an error or something that is looking out of place, then the bureau has to halt and verify the information before it shows on your file. This can prevent your report from being updated quickly. If you are wondering, “How often does credit karma update?” then lenders report information at least once a month. When the data is added to your report, it is most likely to give you a new credit score.  

When Did Credit Scores Start Going Down? Top 5 Reasons

Credit bureaus gather a massive amount of information regarding your credit accounts. Some examples include your payment history, reported balance, and credit limit. If you have any trouble using your credit card responsibly, then your report might also have negative items. Such items result in a change in your credit score (not in a good way).

At least there is good news regarding the delinquencies as well as other negative items. There are time limits for how long they will stay on your reports. After the time expires, they automatically drop off your credit report. Moreover, it can be a bit frustrating to hear, but after the initial two years, the negative impact on your scores begins decreasing. Let us take a clearer look at some of the most common factors individuals cannot wait to get off their credit reports:

Late Payments

Late payments are known to stay on your reports for up to seven years, beginning from the date of your missed payment. Bear in mind that you do not mostly get reported to the credit bureaus unless you are more than 30 days late for your payment. So, all you need to do is make payments on time so this does not happen to you. If you are concerned regarding “How often does Fico score update,” then the answer depends on the subscription you have. Basic one updates on a monthly basis. You can set up reminders to pay on time. Moreover, do not forget to focus on all of your bills. If you default on a phone bill, for example, it might also show up on your reports if the creditor decides to report it.

High Credit Utilization

You have a credit utilization ratio. It is the amount of credit you have used in contrast to the credit that you have available. If your ratio is higher than 30 percent, then it might lower your scores. In order to boost your credit score, try to keep your ratio below 10 percent. This might seem impossible. However, once you build a solid credit history, you will get high credit limits, and it will be easier to pull off.

Bankruptcies

This is a big one for a lot of people. A Chapter 7 bankruptcy tends to stay on your report for up to ten years. On the contrary, a Chapter 13 bankruptcy typically gets removed after seven years. A Chapter 7 bankruptcy will stay on your report a bit longer due to most of the debt being unpaid.

Hard Inquiries

Lenders can perform hard pulls or “hard inquiries” when you submit an application for financial products, such as loans or credit cards. These inquiries are official reviews of your credit report and can significantly decrease your score between zero and five points. Such an inquiry stays on your report for about two years, but it does not affect your score after a year or so.

Other Negative Items

Things including repossessions, collection accounts, foreclosures, and some lawsuits stay on your report for seven years. It is important to keep track of when the negative data is supposed to drop off your credit report. Errors happen, so you can ensure that the item does not stay on your credit report any longer than it has to. Keep in mind that after the initial two years, the effect on your score reduces. Meanwhile, pay all of your bills on time and practice good credit habits.

Now that you know how often is credit score updated, let us look into how often you should check your scores:

How Often Should You Review Your Credit Reports?

Since your scores are dependent on the contents of your credit report, you wish to make sure that your reports are free from any signs of fraud and errors. Bear in mind that you are entitled to a free credit report every week from each major credit bureau. You do not need to check them that often unless circumstances make you do so. For instance, if you have recently been a victim of identity theft or are going through a rocky divorce, you should keep an eye on your reports.

You can also review one of your three annual credit reports every three to four months. You can also seek help from credit monitoring services, such as Gifted Financial Services, to see your reports side by side. Keeping tabs open on your financial accounts by reviewing them weekly is also a great idea. Checking your reports helps you identify a scammer who has opened a new account under your name. However, monitoring accounts online enables you to determine fraudulent purchases in a jiffy so you can minimize the damage.

In A Nutshell

The answer to when do credit scores update depends on the information present in your credit scores – among various other factors. You cannot control how often they update. No matter if you are trying to improve or maintain your credit scores, it is vital to monitor your credit periodically. And Gifted Financial Services is one way to do that without hurting your scores. With time, monitoring your credit might give you a greater understanding of the factors impacting your scores. You will have a good idea of where you financially stand. With this information, you can take the next steps toward your financial goals.

If you have ever missed any payment on your credit card or loan, you know the sinking feeling that follows. It is an easy mistake but can have grave consequences, including higher interest rates and late fees. If you fail to make the payment for more than 30 days, it can also lower your credit score.

Now, removing these late payments is something that you can do to keep your credit score ranges up. However, it is not as easy as it sounds, but it is possible. If you wish to remove that negative mark from your credit history, then read this guide. Here is how to delete late payments from credit report to improve your bad credit score.

How To Remove Late Payments From Credit Report?

Credit bureaus and lenders can only delete unverifiable or inaccurate information from a credit report. This means that legitimate payments cannot be removed, regardless of how many online articles suggest you do so. You can wait it out, and if you are thinking, “How to remove 30-day late payment from credit report” then negative information, such as late payments, usually stays on your credit report for seven years.

This might look like a long time but a few thuds in the road might smoothen out with time. If you get your payments back on track, your score might go back up possibly regardless of one or two late payments. Keep in mind, creditors usually consider your entire history while looking at your credit report, not only the faults.

Even if you know the late payment on your credit report is valid, it is a great idea to request a new copy of your credit report after a few months to ensure the road ahead remains smooth. Remember, actively staying on top of payments is the key to moving forward. Now, back to the question…

Steps Of How To Get Late Payments Removed From Credit Report

Let us say you observe a dip in your credit score that you do not understand. How can you fix it? What can you do? Getting a copy of your credit reports is the perfect way to figure out what is going on. You can get your credit reports all in one place by signing up for Gifted Financial Services.

Next up, look the reports over for any mistakes concerning your payment dates, personal information, and account statuses, for instance. Mistakes can happen. If the ding in your bad credit score looks to be from an incorrectly reported late payment, it needs to be removed or fixed. In order to get a false payment removed from your credit report, you can:

File A Dispute With The Bureau

Credit score monitoring services, such as Gifted Financial Services, offer tools for you to remove late payment from credit report. This process involves describing every issue and giving any proof that you have.

Send A Dispute Letter To The Lender

Send a letter explaining to your creditor what is wrong with your report. You can also seek services from experts from Gifted Financial Services. These experts can even write a dispute for you to convince the bureaus.

Re-Dispute

If the bureau does not resolve this dispute in your favor, you can send in another dispute along with acceptable reasons for late payments on credit report. Moreover, do not forget to add additional relevant documentation.

Provide A Statement Of Dispute

In the end, if you cannot get the bureau to remove it, you have the right to add a statement to your credit report explaining why you disagree with something in it. This statement will be visible whenever anyone views your credit report.

File A Complaint With The CFPB

You can submit your issue to the CFPB, which will try to work it out. They try to get you a response in only 15 days. You can conduct your research on how to get late payments removed from credit report to how to deal with the situation expertly.

The Effects Of Late Payments

A few late payments may not seem like a lot, but it might be a problem for lenders. Missed payments on your report can raise your concern about the borrower’s financial responsibility. Moreover, the borrower might, therefore, be seen as a risk. But this is not all; late payments might also lead to:

Penalty APRs

After about two months without payment, credit card issuers might charge penalty APRs as high as 29.99%, which can stay in effect for up to six months after on-time payment resumes. There are many credit score services, such as Gifted Financial Services, to help you with the matter.

Credit Score Drops

FICO credit scores consider past payment history to be the most important factor when determining your score; it counts for 35% of the total credit score. A payment missed for an entire day billing cycle will most likely be reported to the major credit bureaus and appear on their reports. Sadly, the better your score is, the more damage a missed payment might do.

Late Fees

Late payment fees have been lowered from $32 to $8 by the CFPB. Moreover, the good news is if you pay off your statement balance or make your credit card minimum payment before the next billing cycle, my credit score typically would not drop, and the negative information won’t show up on your credit report.

The Takeaway

There are ways through which you can remove late payments from your credit report to help improve your credit score. However, if a payment is late authentically, it cannot be removed legally, regardless of how much you try. The good news is that missing one payment or two is most unlikely to hurt your credit score much, particularly if you have a brief history of on-time payments. By now, we are sure that you are aware of how long do late payments stay on credit report and what you can do to remove them. If you need any help regarding your credit scores or reports, then seek help from the experts of Gifted Financial Services.

Annual percentage yield (APY) and Annual percentage rate (APR) sound more or less the same. They both have a lot to do with interest rates.  But there are tons of differences that set them apart. For instance, APY is the rate of return you can expect while investing or saving money. It represents how much you can earn, factoring in compound interest.

On the other hand, APR is the yearly rate you will pay on a loan, including interest as well as other fees. It represents the cost of the money that you borrowed. It will help you make more informed decisions if you understand the difference between APY and APR. So, let us discuss these terms one by one to understand them better. 

APY vs APR |All You Need To Know About These Rates

What Is APR?

Annual Percentage Rate (APR) typically applies when you borrow money through loans, i.e.:

1. Home equity lines of credit
2. Credit cards
3. Personal lines of credit
4. Car loans
5. Student loans
6. Personal loans
7. Home loans

APR measures the amount of interest as well as any other fees that you will be charged when you borrow. The lower the APR, the less interest you might have to pay.

APR Vs. Interest Rate

The CFPB sheds light on the fact that, while considering APR vs APY, you must also think about the interest rates. APR includes the interest rate plus other costs, such as insurance, lender fees, and closing costs. If there are no lender fees included in the APR, then this rate, combined with the interest rate, might be the same. This is typically the case for credit cards. Because APR can include costs, including lender fees, it might be more useful than the interest rate when comparing particular types of credit offers, such as auto loans.

What Is APY?

Annual percentage yield (APY) is also known as Effective Interest Rate (EAR). Typically, EAR or APY applies to money in deposit accounts, including:

1. High-yield savings accounts
2. Money market accounts
3. Certificates of deposit

It can display the amount of interest an account could earn in a year. Generally, the higher the APY, the more interest your investment could earn. How much you earn also depends on how much money you have in your account. Moreover, keep in consideration that if the APY for a deposit account is variable, the yield might change after the account is activated.

APY Vs. Interest Rate

APY is a wider measure than the interest rate. This is also because it reflects compound interest and how often compounding happens during a year. Compound interest means you do not get interest on what you have deposited. You can also earn additional interest on the interest you already have earned.

This can make it much more useful for comparing deposit accounts. For instance, let us say two accounts have the same interest rate. The annual percentage yield might show that the one that compounds periodically will earn you more interest than the one that compounds per year. If you wish to keep tabs on your credit, then you can try Credit Breeze, offered by Gifted Financial Services. It is one of the best credit score monitoring services that can help you with your scores.

What Is The Difference Between APR And APY?

Even though APY and APR both measure interest, they are not the same. Generally, the APR measures the interest charged when you borrow money. On the other hand, APY measures the interest earned when you invest or save money. Usually, the APR is associated with credit accounts. The lower the APR account, the lower the overall cost of borrowing might be. On the contrary, APY is mostly associated with deposit accounts. The higher it is, the more you will earn.

Which Is Better, APR Or APY?

APR and APY are both helpful when you are shopping for rates and comparing which of them works the best for you. APR can help you estimate how much you might owe on a car loan, home loan, credit card, or even personal loan. At the same time, APY helps you see how much you can earn in a year in a CD or a savings account. If you are worried that how to improve my credit score, then sign up at Gifted Financial Services. You will be able to see your scores from the three major credit bureaus simultaneously.

APR Vs. APY In A Nutshell

Understanding the difference between APR and APY might take some of your time and effort. We are sure that you have a clearer idea of what sets APR apart from APY. While both of these rates might sound similar, they are a lot different from one another. APRs and APYs both offer vital insights into the investments and loans they describe. However, it is essential to be aware of the restrictions of each at the same time. While APYs are commonly a more realistic indicator of interest owed, APRs can be more insightful of the other costs associated with borrowing apart from interest rates. By understanding the key differences between these rates, any consumer can think of themselves as being armed with the ability to draw effective conclusions from these ways of describing interest.

You can be denied a checking account for a lot of reasons, including a negative mark in your banking history, inability to verify your identity, or suspicions of fraud. These are only a handful of reasons; in reality, there are a lot more. If you are interested to know more about closing Bank of America account, then read on. Below, we have shed light on why banks might turn down your checking account application.

Top 8 Reasons Why Can’t I Open A Bank Account

Your Business Is Brand New

One of the major reasons why you might be rejected is that your business has only started, so you have no financial history yet. However, in a lot of cases, you are not rejected for being new. This rejection will tie into another reason – your business does not have proper documentation.

Moreover, many banks only deal with well-known companies. You will be unable to open accounts with them unless you are more notable. In a lot of cases, you must start with your local bank, i.e., Logix online banking. By doing so, you will help your business open an account, but it might be able to help you connect with an attorney to help you get all the documentation that you require.

Your Business Is Missing Documentation

This is one of the most common reasons why banks deny accounts, particularly if you apply online. If you do not have the required documents, the bank may not be able to verify essential information about your business. Thus, you will either be denied or will be put on hold until you provide the required information. It is best to contact an attorney to aid you during your business formation.

The Bank Can’t Verify Your Information

For the reason that blends into the first two items above, a bank might deny your new account if it cannot verify the information you provided. This might often be cleared in an instant, which will permit the bank to approve your account.

Your Business Or Business Owners Have Credit Issues

When opening a new Bank of America joint account, your bank might pull the company’s credit report to make sure that there are no credit issues. Moreover, the bank might pull personal credit report range on the business owners. This is particularly true if the business is too new you will have to improve credit score. While the bank might approve a business with issues on one of those credit reports, you might be denied. It is vital to keep a close eye on your business as well as personal credit reports. Moreover, you must also handle any problems to avoid being denied new accounts and potentially new lines of credit.

Your Business Appears In Check Verification Systems

Another reason why a bank denies a new account is for your business or one of your owners to show up in a “check verification systems report.” Services such as Early Warning Services (EWS), ChexSystems, and TeleCheck maintain business and consumer deposit account activity lists. If your business or one of your owners shows up on these lists, a bank might deny your new account. If this happens, you will be required to resolve the issue prior to applying for a new account, as nearly every bank uses a check verification system.

Your Type Of Business Is Not Supported

A number of businesses cannot get a business bank account at many banks. Such businesses might be involved in entirely legal activities but carry a risk that banks are unwilling to take. Federally-backed banks are banned from opening accounts for a few business types. Moreover, businesses performing illegal activities cannot get an account. While it is not a complete list, here are some major business types that are often denied a business bank account:

1. Gambling-based businesses
2. A business selling illegal products or performing illegal activities
3. The sale of services and products that might be patently offensive
4. Drug-related businesses, including medical marijuana and cannabis
5. Selling firearms, weapons, or any related items that might cause injury
6. The sale of vaping products, tobacco, or e-cigarettes

• Business Organization Might Not Be Supported

While many banks support many business organization types, some Chase student account, banks, or fintechs might not support every type of business. Many of them will not permit sole proprietors to open an account, while others might not permit multi-owner LLCs. Check the bank’s website to see which organization types are eligible to open an account. Moreover, some traditional banks may not let you open an online account based on your organization type. In those situations, you might have to pay a visit to the branch to open an account. Again, these banks will either contact you to let you know once you begin the process or include this information on their websites.

Business Transactions May Be Suspicious

If your business has a record of suspicious activities, you might be denied opening a new business bank account. Moreover, such activities might result in an existing account to be closed. Banks are required by the Office of the Comptroller of the Currency to fill out any suspicious activity reports (SAR).

Bottom Line

If you can steer clear of the reasons listed above as to why your ally joint checking account is denied, you should be able to open an account easily. If your account is rejected, it might be due to any reason. That reason can be as simple as verifying information with the bank or clearing up a small issue to turn that rejection into an approval. The bank should provide you with a clear reason for denial if you are turned down for an account. So, once you resolve these issues, you must be able to open your account successfully.

Usually, in movies we see people leaving behind billions of dollars to their children and grandchildren. Such wealth securely locked away in trust funds, so that their family can enjoy a good life. Sounds a bit too unrealistic for your family?

Well, in reality, you could leave behind funds to make life a bit easier for the next generation. To do that, you need to learn how to build life insurance generational wealth. Anyone can begin building a financial cushion for their family that lasts way beyond their own lifetime. Even if you are a middle-income family, it is still possible to create such a sort of security net for your children or even grandchildren. Let us see how:

What Is Generational Wealth Life Insurance?

Generational wealth refers to leaving an inheritance for the next generation, such as your grandchildren and children. Handing down wealth from one generation to the next generation of your family allows you to leave something behind. In many cases, this is referred to as family wealth or even a legacy. There are a lot of ways to leave behind your wealth. This might include cash but also includes bonds and stocks, life insurance proceeds, or real estate.

Generational wealth helps secure the financial future for your children and usually their children. It also secures your extended family’s financial future. It is not always possible to leave a huge amount of money in the form of an inheritance to your family, but it is also possible to give the next generation resources that can offer them a kick-start financially.

How To Build Generational Wealth?

Building generational wealth takes a lot of consistency and time. Establishing good financial habits and putting strategies into place early can help you create a lot more opportunities for wealth-building. These tips can help you maximize your legacy and build wealth for the next generation.

Eliminate Debt

As per Experian, in 2023, an average U.S. adult has $6,501 in their credit cards. Moreover, they also had an average of $19,402 in personal loan debt. Student loans, auto loans, and mortgages add more to this amount, leading to an average debt of $104,215. Eliminating this debt means saving money on interest and freeing up more funds for future investments. Make it a prime concern to pay down all of your high-interest debts. For instance, if you are putting money into an investment account that earns 2 percent but your credit card interest rate is 17 percent. So, you are actually losing your money by not clearing out your debt first.

Buy A Home

Purchasing and paying off a mortgage loan on a home is one of the key elements to building generational wealth. Instead of putting money toward rent every month, you will eventually have an asset you own that is clear and free. Once you pass on, your family can decide whether to sell the home to get a place all their own or keep it in the family.

Start A Business

When it narrows down to using life insurance to build wealth, building a business is one of the more difficult but most rewarding options out there. The investment in a business that becomes profitable through wise decisions and constant work can carry on from one generation to the other. Whether it is bookkeeping, flower arranging, or anything you are passionate about, establishing a business and investing wisely in it can create opportunities for your family for years to come.

Invest In The Market

You do not have to be a stock market guru to start investing. By investing in the market wisely, you can minimize the risks and benefit from tax breaks to make your money grow faster. The sooner you start investing, the better it will be for you.

Instill Good Financial Habits

Building generational wealth is not only about leaving assets or money behind. It is also about leaving skills, greater financial habits, and skills behind. Teach your generation how to save rather than blindly spending money. Build from a budget. Work along with your children to teach them about investing. These things can last a lifetime.  

Consider Life Insurance

After your demise, life insurance is one of the most convenient and budget-friendly ways to offer your family a major financial cushion. This is why a lot of people are now looking for “how to use life insurance to build wealth.” You pay a premium each month, and your life insurance company gives a cash payout to your family when you die while the policy is active.

Life insurance comes in many forms, based on your goals and budget. If you are looking to give your family extra protection while you are raising children or paying off a home, a life plan provides affordable protection for a time period. If you are looking for a guaranteed payout for your family, permanent life insurance lasts your entire lifetime as long as you keep up with the premiums.  Now, let us dig a bit deeper to see whether life insurance can help you build wealth during your lifetime.

Can Life Insurance Actually Help You Build Wealth During Your Lifetime?

Well, yes, it can. However, it all narrows down to the type of policy you have. There are two main kinds of life insurance, i.e.:

Whole Life Insurance

Life insurance coverage for life and also pays a death benefit. What makes it innovative is that this policy also accumulates a cash value during your lifetime. You can borrow against this amount as required and pay it back, or take money out clear and free. You only need to be aware that your death benefit will be reduced if you do not replace the funds that you borrow.

Term Life Insurance

This offers coverage for a predetermined amount of time, which can last anywhere from 12 months to up to 30 years. You will likely pay a fixed premium throughout the term. If you pass away during this time, a death benefit will be paid out. Typically, this sort of policy costs less than the one we discussed above.

The Bottom Line

Building generational wealth with life insurance can help you fortify your family’s wealth and shore up your legacy. At least your policy’s death benefit can offer much-required financial security during a difficult time. A suitable policy will depend on your budget and risk tolerance.