In the last few years, the number of people filing bankruptcy in the month of January and February has increased a lot. This is because the debtors incur huge credit card debts during November and December while they buy gifts for their friends and relatives. However, the debtors want to have an easy recourse – they want to file bankruptcy and make a fresh start. But, things are not so easy. As per the bankruptcy code, this is known as “credit card binge” and Section 523(a)(2)(C) addresses this issue.

What does the bankruptcy code state?
Section 523(a)(2)(a) states that the debtor will not be able to get a discharge if he/she has incurred the debt under false pretenses, a false representation, or actual fraud.

As per section 523(a)(2)(C), debts payable to a single creditor (more than $500) for luxury goods incurred by a debtor on or within 90 days before the order for relief under bankruptcy is considered as non-dischargeable
Apart from this, cash advances which add to more than $750 that are extension of consumer credit under a revolving account which was obtained by the debtor on or within 70 days before the order for relief are considered to be non-dischargeable.

If you’ve incurred a huge credit card debt during the holiday season and plan to visit your bankruptcy attorney, be assured that he will advice you to wait for the next 5-6 months. Also, he would recommend you to make regular payments during this time.

There has been a forum discussion where a poster has asked if he can qualify for an FHA-insured loan as he is self employed. The loan officer, he talked to, said he would not qualify for the FHA loan unless he does a Statement of Income and shows considerable amount of money in the bank. Alternatively, he can also have a co-signer to qualify for the loan. The poster currently lives in a 3-family home and wishes to use the rental income to qualify for the new loan. His questions are:

1. Can he qualify for a FHA loan even though he is self-employed?
2. Can he use the rental income to qualify for the mortgage?
3. Does he really need to have a co-signer?

Self-employment does not disqualify the poster for an FHA-insured mortgage. He does not need to have a permanent job to get approved for the loan. The poster has a credit score of 720. So, in terms of credit he does qualify. But he needs to show that he has been self-employed for at least the past 2 years and has a stable income to afford the mortgage payments.

What are FHA guidelines regarding self-employed borrowers?

As per FHA rules, a borrower is considered to be self-employed if he owns 25% or more of a business. To qualify, he needs to provide the following documents:

1. Individual tax returns, including all applicable schedules, for the recent 2 years.
2. Federal business income tax returns, with required schedules, for last 2 years.
3. A year to date profit and loss statement and balance sheet.
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Christmas is back again! It’s time to plan again for the budget so that buying gifts and arranging for a vacation becomes easier for you. Here are few tips which will help you in spending your Christmas in a simple and enjoyable manner:

• Arrange a party at home: With the heavy snowfall disrupting the transport system this year, why not arrange a Christmas party at your home with your near and dear ones? I’m sure that would be great fun. Invite your closest friends and relatives to this party. Home made cookies, cakes, apple cider, custard, etc will definitely bowl over your guests and you would turn out to be the perfect host this Christmas!

• Go for hand-made gifts: Hand-made creative gifts attract everyone, isn’t it? This Christmas, try to give low cost but creative gifts to your friends and relatives. A hand-made card, a box of home-made cookies and brownies, a pack of home-made chocolates – I’m sure those receiving these gifts would definitely love them. You can divide the amount of money that you save in this manner and contribute a portion of it towards your vacation fund and other half towards charity.

• Limit your Christmas decorations: You can even limit the decorations of Christmas tree to some extent and save quite a few dollars. Don’t be dead set on buying the largest and the most expensive Christmas tree available in the market. Buy a small and affordable Xmas tree. You can even keep your expenses for Christmas lights and ornaments to a minimum.

How about a vacation?
Have you planned for a vacation after the Christmas and New Year celebration gets over? If not, then go ahead and do it! The money that you save by spending your Christmas in a simple way will help you in  planning for this vacation. Visit a peaceful place which will help you relax and de-stress yourself. The Star Island in Bahamas, Madagascar, Metz in France, Tasmania or Zambia can be some of the places which you may visit during the beginning of the new year. The sublime landscapes, gala music festivals or the trendy new resorts of these places will help you start the New Year in a positive way.

Wish you all a Merry Christmas and a Happy New Year!

You might be working under various employers from time to time. But what about the 410(k) retirement plan that you’ve with your employers? Lot of people are confused as to whether or not they should leave the account as it is or roll it over into an IRA account.  Let’s check out which is the best option to go for:

Leave 401(K) with your ex-employers:
It is better not to keep your retirement savings with your ex-employers. One of the main reasons for it is that after 2-3 job switches, you will find your money is spread across various 401k plans and that too at different places. This may make it difficult for you to plan your investment strategy for retirement. However, there can be some cases wherein it would be a better option to leave your 401(K) with your ex-employer. Check out the reasons:

• Move to another job within short time period: If you feel that you would be able to get a job within a short period of time, then it’s better to leave the 401k with your ex-employer. You can get a new job and then transfer the old retirement plan into your new employer’s plan provided he allows the rollover money.

• Closer to retirement age: If you’re closer to your retirement age, it’s better to leave your money with your ex-employer. If you are under 59 and ½ years of age and transfer balance into IRA and then withdraw money from IRA to meet your expenses, you will have to pay income tax. Also, you would be responsible for paying 10% penalty.

If you are withdrawing money from your company’s 401(k) account, you won’t be responsible for the 10% penalty provided you’re 55 years or more of age. However, you’ll still be responsible for paying income tax on taxable amount that you withdraw.
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Housing prices are still going low and most of us are thinking that it would be the best time to buy the dream home in 2010. With the extension and expansion of first time homebuyer’s tax credit, things have become easier for most of us. However, before you decide to apply for a mortgage in 2010, here are 5 things you need to know:

Tighter lending rules: The first time homebuyer’s tax credit has been extended by the government and more people are looking forward to buy a home. However, it’s expected that the lending rules will remain tighter throughout 2010. After the real estate crisis took place, lenders have become extremely cautious. There are hardly any loans available without down payment. Moreover, no-doc loans have also become obsolete these days.

Credit score: In order to get best mortgage rates, especially for conventional loans, you would require a credit score of at least 620. The lenders would ask you for documents supporting your income and other assets. Check your credit reports on a regular basis to know if any unnecessary negative item is mentioned in it. If you find such an item, take steps to remove it. You can get a free credit report once in a year from annualcreditreport.com.

Down payment: Presently FHA loans require a down payment of 3.5% and conventional  loans would require at least 20% down. Making a down payment will help you get better interest rates. Also, you must understand that if you’re unable to pay the required down payment, you will have to go for private mortgage insurance.
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With the rising number of foreclosures in the country, many of the struggling homeowners are opting to file bankruptcy as a means to get rid of their unmanageable debts. Queries related to bankruptcy are quite common in the forums these days. Here’s one such query on which the community had a discussion recently:

The poster wants to get rid of his debts including small business dues and credit card debts. He owns a property which has a first and a second mortgage. The value of the house is less than what is owed on the first and the second mortgage combined. He now plans to file Chapter 7 bankruptcy to get rid of his debts, while retaining the home. His queries are:

1. Can he list the second mortgage in bankruptcy to get it discharged, while keeping the first mortgage?
2. Will the second mortgage lender still be able to come after him?

Chapter 7 is an effective way to discharge debts

Bankruptcy Chapter 7 is one of the effective ways to eliminate debts which cannot be managed further. If the poster is really having difficulty in paying off the business debts and the high-interest credit card debts, he can file Chapter 7 and have them discharged through the bankruptcy. He wants to keep the property. He will have to list all his assets like his personal properties, real estate properties, etc. in bankruptcy. The court will then decide which of the assets will be sold to pay off the creditors. (more…)

As per the Truth in Lending Act, the right to rescission helps a borrower to cancel home loans of certain types within three days of closing. This right is offered on a “no-questions-asked basis”. The lender will have to refund all the fees within 20 days of exercising of the rights and also give up its claim over the property.

How to exercise right of rescission:
You’ll have to inform the lender in writing if you want to exercise the right of rescission. A phone call will not help you in this case. You’ll have to drop the letter in a mailbox within the deadline of 3 days. However, it is not necessary that the letter has to be postmarked.

Calculating the 3-day rescission period:
After the closing of a loan, you’ll get 3 business days time to rescind your loan. Weekends or holidays will not be a part of the time period. So, how can we define a business day? Well, every day except Sundays and federal holidays is a business day. You will find that though the lender’s office is closed on Saturday, it will be counted as a business day.   The time period expires on the midnight of the third full business day after your loan documents are signed.

Type of homes that qualify for right of rescission:
Types of homes don’t really matter in this case. Your property can be a condominium, a floating home, single-family house or a manufactured home permanently attached to the land. In all these cases, you would still have the rights to rescind a loan.
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