Between the loose home lending practices common about a decade ago, and the housing decline and economic difficulties that followed, home foreclosures have been a common occurrence across the United States. If you are facing foreclosure, know that you are not alone. You have many steps you can take to work through the process. Avoiding foreclosure The best way to avoid foreclosure is to keep up with your mortgage payments. Even if your home is worth less than you owe on your mortgage, the bank cannot initiate a foreclosure unless you fall behind on payments. Therefore, plan your finances carefully to budget for your monthly payments if you want to keep your home. This may mean cutting back on other things you’ve become accustomed to, like cable TV, eating out, or having a gym membership. If you can tell you are not going to be able to afford your payments, act quickly to do everything you can to keep up. Perhaps you have some assets you can sell, like an unneeded car or some valuable jewelry. Another option is to get a part-time job to help make up the shortfall in your monthly cash flow. Working with lenders The lender is not your enemy when it comes to foreclosure. Ultimately, the lender’s preference would be for you to keep your home and continue making payments on it. Because of this, lenders are willing to work with you; especially if you are confident you can get back on track with your payments. Be quick to respond to all communications from your lender about your mortgage or the potential for foreclosure. Even take the initiative to call your lender if you know you’ll miss a payment. If you explain your situation, the lender will sometimes allow you to postpone payments or pay only interest for a short time. If you show you are willing to make financial sacrifices, lenders are often happy to work with you. Understanding your options Despite your best efforts, you may have a situation in which you really can’t keep up with payments. In this scenario, you have two major options. The first is to work out a solution with your lender, whether it is refinancing, going through a loan modification or having a temporary change in required payments. The second is to allow the lender to foreclose on your house, which means you will move, and the lender will sell the house at an auction to repay your mortgage. Watching out for scams Thousands of individuals and companies prey on people who are facing foreclosure. You should never pay for third party help during a potential foreclosure, nor should you sign any documents unless you fully understand them. If it sounds too good to be true, that is probably because it is. You may unknowingly be signing over the title to your home! Instead, find a HUD-approved housing counselor by calling (800) 569-4287.

Dealing with a Home Foreclosure

View Resource Dealing with a Home Foreclosure
Unexpected medical bills are one of the most common financial setbacks a family can face, so you should have a plan in place to handle them should they occur. Of course, the best plan is to have a great health insurance plan, or money saved to pay the bills for which you could be responsible. Those options are not feasible for everyone, however. You can still use plenty of wise strategies to reduce the impact of a medical emergency. Avoiding unnecessary treatments and expenses The cost of medical treatment depends on what care you get and where. For example, if you have health insurance, you may be able to call a nurse’s hotline through your insurance company when you first notice non-emergency symptoms. The information you receive can dictate your next step, whether that be scheduling an appointment with your regular doctor, or heading to a clinic or a drugstore to have a prescription filled. If you do need care right away, consider whether an urgent care facility would be adequate. The wait there is often about the same as any emergency where your condition does not warrant getting to the front of the emergency room line. If you do need to go to the emergency room, drive yourself unless you need immediate ambulance care. Understanding insurance The amount you’ll have to pay for the medical care you receive depends on the type of medical insurance you have. If you have an HMO or PPO plan, you’ll likely have a co-pay for each doctor or hospital visit. If you have a high-deductible plan, your insurance may not pay for anything until you have satisfied the annual deductible. You also may have different costs depending on whether you use medical care providers within your insurance company’s network. Therefore, it is important to know in advance what hospitals and facilities are part of the network. In some cases, you may even need to call for pre-authorization before getting care unless it is a true emergency. Questioning your bills When you receive your medical bills, don’t assume you have to pay the full amount stated. Instead, take a look at the itemized bill to ensure it is accurate. If you received care in an emergency room, you might have seen several doctors and nurses, and perhaps had tests ordered, but not completed. Those could result in billing inaccuracies. If you have questions about any of the charges, call to ask about them. In addition, question anything you are getting billed for that you think is covered by your health insurance plan. Working out payment plans Once the bill is correct, it is time to figure out how to pay it. Hospitals and other medical facilities understand that most people cannot afford to pay a large bill all at once. As a result, they are typically willing to let you use a payment plan. Call the billing department to discuss the options, and make sure you understand whether there are any interest payments or fees for paying the bill in installments.

In Case of Medical Emergency

View Resource In Case of Medical Emergency
None of us like to think about our parents getting older and needing our help. However, it is a fact of life that as parents age, they will inevitably need you to step in and get involved with their finances. With 46.2 million people aged 65 or over in this country today, that works out to many parents needing help as they reach their twilight years. When the parent and child roles shift, it can be hard, especially if you swap roles and become a caregiver to your mom or dad. It is natural to feel worried and overwhelmed at a time like this, however, it is imperative that you take control, rather than avoid the situation. As their adult child, you are the person best qualified to assist your parents when they need help. If you delay in this, it is likely that others, who may not have your parents’ best interests at heart will intervene. When to Step In There are many warning signs that you may notice that will indicate that all is not well with how your parents are handling their finances. These signs may include: It is important to remember that even if you aren’t currently concerned about the mental or physical health of your parents, it’s good to become familiar with their finances as they reach retirement age. The sooner you do so, the more receptive and comfortable they’ll be when it comes to including you in important financial decisions. It will also be far easier to step in and take control when that time comes. First Steps to Take It is best to talk with your parents about their finances while they’re self-sufficient and competent. Before you begin, there are a few things to consider: Always be respectful. Discussions of a financial nature need to be approached with the utmost sensitivity and respect. Neither of your parents won’t want to dwell on what may happen as they age and taking care of their emotional needs while discussing the future is incredibly important. The thought of losing the ability to maintain their financial independence as they age will be a frightening and frustrating thought for your parents. Try putting yourself in their shoes when discussing what the future may hold, and be ready for, and understanding of, any resistance they may present when you discuss their financial affairs. Organize important documents. Find out where your parents keep all papers of importance. Items such as Social Security cards, insurance policies, marriage, and birth certificates, and mortgage information should be kept in a safe place. If your parents rent a safety deposit box or own a safe, ensure you know how to access it. Remember that in the case of safety deposit boxes, you will need to be an authorized signer if you need to gain access. Find out if your parents have estate planning documents. It is important to know if your parents have made a will, living will (also known as a health care directive), living trust, financial power of attorney, or medical power of attorney. You also need to know where the originals of these documents are. If your parents do not have these documents, help them to get them created. These are essential documents regarding estate planning, especially if your parents own real estate or valuable personal property. Know your parents’ finances. Ensure you know all their sources of income, outgoing expenses, account access information, and so on. Create health care and durable powers of attorney. This will ensure that your parents can appoint a trustworthy person to manage both their health care decisions and their finances if they should ever become incapacitated. Stay Involved It is important for you to act swiftly to help your parents with their finances when it becomes apparent to you that they need assistance. The longer you wait, the more difficult it will become to work through the accounts and legalities you need to. It is also important to stay involved so you are aware of any financial changes, or issues your parents may be facing. With your help, they can be confident that their finances are being well managed. Seeking out good financial assistance, and planning ahead on behalf of your parents will help ensure that their later years are secure, comfortable, and stress-free. Working with your parents now is the best option both for them and you.

Helping Your Parents with their Finances

View Resource Helping Your Parents with their Finances
One of the most emotionally vulnerable times in your life is also one of the times when you’ll need to do the most financial paperwork. The good news is that there are plenty of resources to help. Don’t be overwhelmed by the tasks ahead of you. Seek support from other family members as you deal with the financial implications of a death in the family. When you take things step by step, you’ll make it through everything in the end. Gathering financial paperwork After a death in the family, you’ll need many types of legal and financial documents to sort out the deceased’s finances and how they might impact those immediately around them. The major documents needed include 10 to 20 copies of the death certificate, the original birth and marriage certificates. Find the deceased’s will, if there is one and any life insurance policies. You will also want the most recent financial statements for all bank accounts, credit cards, mortgages, auto loans, and investment accounts. In addition, you will need tax returns from the last couple of years and applicable Social Security statements. This information might be difficult to find if you were not responsible for the management of the deceased finances. Often, they are stored in filing cabinets at home or in a safe-deposit box at the bank. Check with those closest to the individual to see where they might have kept this type of documentation. Assessing the financial situation Once you’ve collected all of the documents, the executor of the will can begin sorting out the financial situation of your loved one. The first step is to file a probate petition in court to get legal authorization to handle the finances. The executor will then need to log all liquid and property assets, and identify any debts secured against them, such as a mortgage or auto loan. Other debts, called unsecured debts, are also logged. In general, assets left over after paying debts are distributed to heirs as outlined in the will. If it was your spouse who passed away, you’ll also want to assess your immediate financial situation and cash flow. Your deceased spouse will no longer receive paychecks, Social Security benefits, and other payments, which may leave you in a tough financial spot. Take a look at your immediate expenses and plan where you will get the money to pay for these. If you do not have any liquid funds or income, you’ll quickly need to collect benefits and transition assets to be able to continue paying your bills. Collecting benefits You’ll need to contact many institutions to notify them of the death and request benefits for which you are eligible during the weeks and months following your loved one’s death. First, contact the Social Security Administration to report the death and collect death benefits if you are eligible. You also may be able to get ongoing survivor benefits. If your loved one had a life insurance policy, you would need to contact the insurance company to report the death and arrange for dispersal of benefits to the beneficiaries. There are also other potential organizations to reach out to regarding death benefits. If the deceased was a member of the military, the Veteran’s Administration would issue benefits. Employers also may have benefits available, including a separate life insurance policy and payouts of accrued sick time, vacation time, and bonuses. When receiving all of these benefits, put them in a safe bank account or investment account to use them as needed, planning for your future rather than spending them rashly while you are grieving. Transitioning assets The last major stage to go through is to transition assets to their new owners, as outlined in the will. You will need to call all of the financial institutions at which the deceased held accounts and notify them of the death. Then you’ll need to either withdraw the assets to transfer them to new owners or change the name on the account to the new owners. When handling retirement accounts, such as an IRA or 401k, you may want to roll over funds to your account rather than withdrawing them. Cancel insurance policies, memberships, and subscriptions you no longer need. Your last step is to file an estate tax return within nine months of the death. In addition, you are responsible for filing a tax return for the deceased in the year of the death, presuming there was income during that year. When you have completed these steps, you’ll be done handling the finances and be ready to move forward on your own.

A Death in the Family

View Resource A Death in the Family
Nobody plans to be suddenly let go from a job, but, unfortunately, it happens more often than you would like to think. That sinking feeling of not knowing where your next paycheck is coming from or how you are going to pay your bills may feel overwhelming at first, but it does not have to be. With some careful planning, you can usually stay financially afloat during your time of unemployment and be ready to get right back on your feet when you find work again. The most important thing to remember is that you need to be active and involved each step of the way. Overhauling your budget Your first plan of action is to stop all unnecessary spending. Take a look at your records of expenditures from the last few months and separate them into categories of “needs” and “wants.” You may even be surprised when you realize what you can do without. For most households, typical “wants” to stop spending on include eating out, going to the movies or other entertainment, buying clothes and going on vacations. Don’t stop there, but take a look at your “needs” and consider whether you can cut back on any of those for a while. For example, you could cut your cell plan to the bare bones and switch to basic cable and Internet instead of the package with all the sports channels. Reduce grocery expenses by purchasing store brand instead of name brand foods and cut your utility bills by using your furnace or air conditioner less and turning off lights when you leave rooms. Applying for unemployment benefits You are probably eligible to receive unemployment benefits. Benefits usually range from 25% to 50% of your average weekly pay, depending on what state you live in and your prior income level. You need to apply for these benefits right away because they are not retroactive, and you will not start getting checks until you apply. Don’t let the paperwork scare you away. Spend your first day of unemployment on getting your benefits setup. Start at the state unemployment office website and don’t be afraid to call if you are not sure what you need to do. It may take a large chunk of your day, but you will have the satisfaction of knowing at the end of the day that you accomplished something important for your personal finances. Maintaining your personal and mental health The financial stresses of unemployment may not even be your main challenge. Take care of your physical and mental health as well so you stay upbeat and keep moving forward with your life. Maintain a schedule of job hunting on weekdays and participating in activities you enjoy during non-work hours. Even just going to the gym or heading out for a walk around the neighborhood every day can make a big difference. Continue surrounding yourself with friends and family, too, and don’t be afraid to talk about your struggles with them.

Suddenly Unemployed

View Resource Suddenly Unemployed
There’s no denying the fact that car repairs can be costly. The costs can be even more from simple mistakes, like using the wrong type of oil or forgetting to change it regularly. The more you know about how to avoid these blunders, the longer life you’ll get from your car and the fewer repairs you’ll need to make over time. Good Preventative Maintenance Practices Preventative maintenance includes a laundry list of things you do to avoid mechanical issues related to your car. Proper vehicle maintenance will not only keep your vehicle working but working optimally. A properly maintained car will need fewer repairs over its life. It will also operate more efficiently, meaning you’ll get more mileage from your gas and experience fewer sputters, fits, and breakdowns along the way. The following routine maintenance practices will help you keep your car running in tip-top condition for many years to come. Awareness of Symptoms of Car Problems It’s important to be aware of how your car sounds and behaves when it is operating optimally— and when it’s not. Sometimes, unusual sounds in the operation of your car are first indicators that problems are on the horizon, although many of today’s newer cars provide warning lights to alert you to an issue. Be sure to heed these warnings. Any of these things could be a sign of trouble for your car, and is well worth the peace of mind a trip to your local mechanic or dealership service center to have it checked out. Best Practices When Under Repair To avoid costly repairs and to make sure your car is getting the right service, read all documents carefully. Make personal notes about the problem and the specific type of repair needed. Get a written estimate before repairs begin and make note of any differences between the repair you agreed to and the final repair price. Let the repair staff know that any differences in the repairs must approved by you and your estimate adjusted before you agree to the changes. Ask questions and get answers when the quoted price and actual price are different. Be involved in the process from preventative maintenance to the repair shop. This will help you become a more informed consumer and create a car less likely to suffer from mechanical failure and needed costly repairs.

Avoiding Costly Car Repair Mistakes

View Resource Avoiding Costly Car Repair Mistakes
The thought of filing bankruptcy may make you shudder, but the truth is that sometimes it is the best option financially. Considering bankruptcy is not something to be ashamed of, especially because the causes are often beyond your control. Huge medical bills, financial difficulties after a divorce or mounting debt due to unemployment can all cause irrecoverable financial difficulties. If you have debt that’s beyond your means to pay, you may end up digging yourself into an even bigger hole if you keep trying to handle it on your own. Although a bankruptcy is not something you should take lightly, it often allows you to move forward financially sooner than you would have been able to on your own. Types of bankruptcy In Chapter 7 bankruptcy, you liquidate all of your assets besides those considered exempt by your state of residency. The court distributes these assets to your creditors before writing off any remaining debt. However, be aware that you cannot discharge debts like student loans, tax liens, and child support in bankruptcy. In addition, you must qualify for Chapter 7 bankruptcy with a means test, which assesses your income and ability to repay your debts without filing bankruptcy. The other major option is Chapter 13 bankruptcy, which involves a court-ordered payment plan of three to five years. During this payment period, you make monthly payments to the courts. At the completion of the term, the debts that remain are erased. A Chapter 13 bankruptcy allows you to keep control of your assets rather than liquidating them as would be the case with a Chapter 7 bankruptcy filing. Impact on credit report If all of that sounds too good to be true, it is because there’s a major downside to bankruptcy. A bankruptcy stays on your credit report for up to 10 years, making it difficult for you to borrow money during that time. Chapter 7 bankruptcy will almost always stay on your credit report a full ten years, whereas Chapter 13 bankruptcy will sometimes drop off after just seven years. Either way, you’ll have a hard time getting a credit card or auto loan in the first few years after bankruptcy, and you’ll pay high interest rates if you do manage to borrow. Getting a mortgage may require waiting longer, potentially even until after the bankruptcy drops off your credit report. The effects of bankruptcy on your credit score lessen over time, especially if you do get some form of credit and make consistent, on-time payments to rebuild a positive credit history. Working with creditors to avoid bankruptcy Before filing bankruptcy, contact your creditors to try to work out an alternate solution. Perhaps your creditors can reduce your interest rate or lengthen your repayment period to lower your monthly payments. Creditors also may postpone payments if you expect your financial troubles to ease soon, as may be the case if you are struggling with unemployment. Some creditors will even agree to accept a partial payment and erase the remainder of your debt.

If You’re Facing Bankruptcy

View Resource If You’re Facing Bankruptcy
Filing bankruptcy might feel like a financial disaster and make it seem like you’ll never be able to borrow money again. Not only are each of the debts included in the bankruptcy marked as settled, but the public record of the bankruptcy filing also appears on your credit report. There is nothing you can do to remove the negative information. Each piece of negative information will remain on your credit report for seven full years after it occurs (or ten years in the case of Chapter 7 bankruptcy). While it is true that it is more difficult to obtain credit, especially immediately after a bankruptcy, it is not impossible. The bankruptcy’s effect on your credit score diminishes somewhat as it becomes less recent, and then its effect will stop when the information gets removed from your report after the seven to ten year period. In the meantime, there are several things you can do to improve your credit score by adding positive information to your credit report. Get a credit card: Your previous credit cards were likely all included in your bankruptcy. However, it is important to have at least one revolving credit account, like a credit card, on your credit report. This account should be in good standing, with no late payments and a low outstanding balance compared to the credit limit. There are two main ways to get a credit card after bankruptcy:
  1. Have a family member or friend add you as an authorized user on one of their credit cards, which puts that card’s account history on your credit report. If you are doing this, make sure the primary user pays on time every month and carries only a low balance on the card.

  2. Get a secured credit card on your own, which is a card with a very low line of credit, linked to a savings account with a deposit equal to your line of credit. Banks are willing to offer these because their financial risk is very low when they have your savings account as a backstop.
Get an installment loan: The other type of credit you should obtain to improve your credit report is an installment loan. Installment loans, such as a mortgage, car loan, or personal loan will have equal payments each month. If you have a mortgage or auto loan that made it through the bankruptcy, just keep this loan and continue making payments. If you don’t, consider applying for a secured personal loan through your bank or credit union. Like a secured credit card, you will need to deposit cash in a savings account or CD that the bank will hold until you repay the loan in full. Pay all bills on time: Once you can obtain credit again, all you should do is sit tight and pay your bills on time each month. Create a budget to ensure you can afford to make your payments, and automate payments, using online bill pay or set reminders to keep from missing them. Each month, you will be adding positive credit history to your report, which will slowly rebuild your credit score and reputation.

Rebuilding Credit After Bankruptcy

View Resource Rebuilding Credit After Bankruptcy
Nobody goes into his or her wedding day planning to get a divorce. Unfortunately, the hard truth is that half of the marriages in the United States end up that way. If you see yourself headed towards divorce, recognize that in addition to the emotional distress of officially ending your marriage, you’ll also have to handle a significant financial strain. Divorce has far-reaching effects on both you and your spouse’s finances, so educate yourself about the specifics before you begin so you can come out in the best possible position. Protecting your financial interests Even if you are having a relatively amicable divorce, be ready to stand up for your financial needs. You have the right to your share of jointly held assets, and it is your responsibility to be aware of these assets and insist on getting what’s due to you. Some couples opt to use a Certified Divorce Financial Analyst rather than a lawyer to assess the financial situation objectively and to help divvy up assets and debts in a fair way. If you choose to hire a lawyer to represent you, which makes sense when you do not anticipate an amicable agreement, keep the cost of your legal fees in mind. They could quickly eat away at the savings and assets you are fighting over. Gather financial documents in advance to make your lawyer’s job less time-consuming. In addition, communicate directly with your spouse when possible so you do not have to pay your lawyer to handle the communication. Splitting assets evenly In general, your goal is to divide jointly held assets so each of you end up with half of them. However, that may not mean turning everything into cash and dividing that amount in half. Instead, you’ll often want to each take the full portion of some of the assets, while ensuring that the value of what you each get remains equal. For example, if you own a house together, one of you may want to keep the house but give up other assets, like a car and an investment account. When you are splitting up investments, keep capital gains taxes in mind. Liquidating investments can trigger capital gains tax, so instead, you may want to sign over your share of particular investments to your spouse, while your spouse signs over other investments to you. This allows you to avoid paying penalties on investments you would otherwise want to continue holding. Closing accounts Once you have decided how to split assets, you still have the work of signing the assets over to each other and breaking the ties on joint accounts. Go through all accounts systematically to ensure you do not discover months down the road that your spouse still has access to a bank account that was assigned to you. Likewise, follow-up to ensure that debts your spouse is keeping have had your name removed, so you are not liable for them. In addition to signing over the accounts you are currently using, don’t forget to change the beneficiary on accounts you are maintaining for the future. List a new beneficiary on your life insurance policy and retirement accounts and don’t forget to update your will as well. Keeping sight of the long-term impact The financial effects of divorce will ripple forward long past the signing of the divorce decree. For example, you’ll see the effect on your credit score for years. This is especially true if the majority of the borrowing you did as a couple was in your spouse’s name. This may leave you without any credit history of your own. If you had joint accounts, it is better to keep them open in just one of your names instead of closing them entirely because the longevity of accounts impacts your credit score. If your divorce settlement included alimony or child support payments, these would affect your finances for only a period set out in the agreement. If you are receiving alimony or child support you’ll eventually stop getting, don’t forget to plan ahead for how you’ll manage your finances when your income drops. Regardless of whether child support or alimony is involved, you’ll likely feel some financial strain shortly after the divorce because you are transitioning from one household into two. That means paying for two places to live, two sets of utility bills, and missing out on discounts for buying things like insurance and food together. Therefore, take the time to make yourself a budget that takes your income and expenses into account, and downsize your lifestyle as necessary to make your budget balance.

The End of a Marriage

View Resource The End of a Marriage
If you have fallen behind on mortgage payments and are facing foreclosure, you are probably looking desperately for a solution that allows you to keep your house. There are many places you can turn for help, but, unfortunately, some of the mortgage relief solutions are actually scams. Learn what they look like so you can protect yourself and have the best possible chance of keeping your home. How mortgage relief scams work There are several types of scams, and each one works by a slightly different method. The less sophisticated scams involve people claiming they will help you get a mortgage modification to keep your house if you pay them a fee. Once you pay a fee, they run without doing anything for you. Some of the more sophisticated scams work by getting you to sign over the deed to your house without giving you the money that your house is worth. Who scammers appear to be Depending on the type of scam, the individual or organization that approaches you may pose as one of the many types of financial authorities. In one common ploy, the scammer poses as an attorney who will help fight the foreclosure process for you. In another, the scammers might approach you under the guise of a loan modification company that will negotiate with the lender on your behalf. Scammers can also appear to be potential buyers for your home who say they want to help you stay in the house. What scammers offer you Scammers offer you an easy solution, often one that sounds too good to be true. They tell you that regardless of your situation, they can help you keep your house. They might offer to stall the legal proceedings of foreclosure until you can get back in a position to pay your mortgage. Some scammers will offer to purchase your home from you and let you buy it back under a rent-to-own agreement, but these deals will rarely work out as planned. Tips to protect yourself from these scammers In any financial or legal dealings related to your home, be on the lookout for red flags that suggest you may be involved with a scammer: Before getting involved with any third party, do your research online to learn more about that individual or company. If you are hiring a lawyer, check credentials and ask for references. Overall, keep your guard up and don’t allow anyone to pressure you into doing something you do not understand or don’t feel ready for. Where to find real help There are legitimate ways to get relief when you are facing potential foreclosure, but you will often need to seek them out on your own. First, call your lender as soon as you know you will have trouble making a mortgage payment. You may be able to work out a modified repayment schedule that will keep your loan in good standing. You can also use many legitimate credit counselors who offer personalized advice about your situation. One good resource is the Homeownership Preservation Foundation (HPF), which has a free hotline at 1-888-995-HOPE to help at-risk homeowners. The Department of Housing and Urban Development (HUD) also maintains a database of housing counseling agencies that have the government stamp of approval.

Mortgage Relief Scams

View Resource Mortgage Relief Scams