Is Bankruptcy the Answer to My Debt Problem?

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Q. I can never seem to get ahead of my credit card debt. At what point should I consider bankruptcy? — Falling behind

A. You’ve got plenty of thinking to do before you turn to bankruptcy.

First, you need to take a close look at your budget.

If you have a regular source of income, you need to determine how much monthly excess income you have to dedicate to credit card payments, said Ilissa Churgin Hook, a bankruptcy attorney with Hook & Fatovich in Wayne, N.J.

“Many people are surprised when, after taking the time to prepare a written budget, they see on paper how much money they are spending on ‘extras,’” Hooks said. “Perhaps you have room to reduce your discretionary spending in order to dedicate more money to paying off your credit card debt.”

(You can see how long it will take you to pay down your credit card debt using the Credit.com credit card payoff calculator.)

If you can’t find savings in your budget, or if it will take you many years to pay off the debt while interest and fees continue to accrue, you may want to consider a bankruptcy filing.

You first need to decide which chapter(s) of the bankruptcy code you qualify for, and which chapter is best for you. That determination will require a complete analysis of your assets, liabilities, income and expenses, Hook said.

Most individuals seek relief either under Chapter 7 or Chapter 13 of the United States Bankruptcy Code, Hook said.

“Generally, in a Chapter 7 case, a debtor seeks a discharge from his/her debts in exchange for exposing his/her assets to an examination by a third-party Trustee, who acts as a fiduciary for creditors,” Hook said.

One of the Trustee’s obligations is to look for assets that have equity — after taking into account the costs of sale, any liens against the asset, and any relevant bankruptcy exemptions — that can be liquidated to pay creditors, she said.

That means you need to consider if any of your assets would be at risk — liquidated by a trustee — if you were to seek a Chapter 7 discharge of your debt, Hook said.

Hook said that you can only receive a Chapter 7 discharge (pursuant to which the credit card debt would be discharged or “wiped out”) once every eight years. Therefore, you need to consider whether you should use that opportunity now, or wait.

Further, not all individuals qualify for Chapter 7, depending on household income and expenses, she said.

In a Chapter 13 case, an individual or a married couple with regular income can reorganize his/their debts while retaining assets, Hook said.

“A Chapter 13 case usually lasts three to five years and allows a debtor to repay his/her debts over time via a court-approved payment plan,” Hook said. “The length of the Chapter 13 plan depends on the debtor’s income and ability to make monthly payments.”

She said additional interest on unsecured debts such as credit cards and medical bills does not accrue during the life of the Chapter 13 plan.

A Chapter 13 debtor must demonstrate to the court that he/she can pay monthly expenses including rent/mortgage, utilities, food, auto expenses and more as they become due, and have a surplus to dedicate to paying at least a portion of their old debt.

Hook recommends you consult an experienced bankruptcy attorney regarding all of the relevant facts of your specific situation.

You should also look into a reputable credit counseling firm, which may be able to help you create a debt repayment plan without a bankruptcy. (Editor’s Note: A bankruptcy will impact your credit for years, depending on which type you opt to use, but your credit score will recover over time. You can monitor your bankruptcy’s affect on your credit scores for free on Credit.com.)

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Living Near These Stores Can Make Your Home More Valuable

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If you’re looking for an edge in buying a home that will appreciate in value, Zillow researchers may have found just what you’re looking for.

The real estate website recently analyzed the values of millions of homes near dozens of Trader Joe’s and Whole Foods, finding that these grocery stores and higher home values are definitely related.

Specifically, Zillow found that homeowners saw their values increase more rapidly if they were closer to one of these grocers. Between 1997 and 2014, homes near the two grocery chains were consistently worth more than the median U.S. home. By the end of 2014, homes within a mile of either store were worth more than twice as much as the median home in the rest of the country, the analysis found.

Of historic and anecdotal note, the original location of Whole Foods in Austin, Texas, is now a Goodwill thrift store. The surrounding neighborhoods remain some of the city’s most expensive. At the time of this writing, a two-bedroom, two-bath condo unit just up the street was listed for $899,900. According to Zillow, the median home value in Austin is $290,300.

Trader Joe’s original store on Arroyo Parkway in Pasadena, Calif., is still in operation. At the time of this writing, a two-bedroom, two-bath condo down the street was listed for $778,000. According to Zillow, the median home value in Pasadena is $710,000.

“Like Starbucks, the stores have become an amenity in their own right – a signal to the home-buying public that the neighborhood they’re located in is desirable, perhaps up-and-coming, and definitely improving,” said Zillow Group Chief Economist Stan Humphries. “Like a self-fulfilling prophecy, the stores may actually drive home prices. Even if they open in neighborhoods where home prices have lagged those in the wider city, they start to outperform the city overall once the stores arrive.”

The Starbucks Effect

About a year ago, Zillow did a similar analysis of Starbucks, looking at the relationship between property values and proximity to the coffee chain. That analysis found that homes within a quarter-mile of Starbucks increased in value by 96% between 1997 and 2014. The national average for that period was 65%.

Zillow’s analysis also found:

  • The median home within a mile of a future Whole Foods store appreciates more slowly than other homes in the same city before the store opens. In the months before the stores open, the trend reverses and flips, so that after the stores’ opening dates, homes near Whole Foods appreciate more quickly than other area homes.
  • Homes near future Trader Joe’s locations were appreciating at close to the same rate as other homes in the same city before the stores opened. After the opening date, however, Zillow found a clear boost in home appreciation rates. Two years after a Trader Joe’s opened, the median home within a mile of the store had appreciated 10 percentage points more than homes in the city as a whole over the previous year.
  • These two brands are obviously very good at choosing locations that will appreciate faster in the future, or are actually spurring home appreciation growth – or some combination of the two.

Remember, a good credit score can help make housing more affordable in any area since it generally entitles you to better rates on a mortgage. As such, it can be a good idea to check your credit before you apply for a mortgage. You can do so by pulling your credit reports for free each month at AnnualCreditReport.com and viewing your credit scores for free each month on Credit.com.

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Need a Vacation? 4 Warm Places That Are Cheap to Visit Right Now

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Tired of the winter weather and dreaming of getting away for a long weekend or a full-blown holiday, but worried the cost could break the bank? We’ve talked to some travel pros who say budget-minded travel is a possibility if you know where to look. (Be sure to redeem miles when you can, and keep in mind these credit card tips for traveling abroad if you are getting ready to book a winter vacation.)

1. Costa Rica

This Central American democracy is a budget-friendly destination all year long, offering a variety of hideaways even in high season that won’t break the bank.

“Costa Rica is one of my favorite budget-friendly vacation spots to visit,” said Anita Covic, destination specialist with TripTogether.com. “Instead of forking over a pretty penny on a hotel or resort on the Pacific side I recommend renting a whole house for the same price on the Caribbean/Atlantic side with full access to the beach, shops and amazing cafes. Playa Limon is one of the most popular Caribbean/Atlantic side areas in Costa Rica with great affordable food and activities.”

There are a plethora of things to do to occupy everyone: The night life is great for couples, while daytime activities such as surfing and snorkeling are great family outings, Covic said. Another attractive feature is that the U.S. dollar is strong in Costa Rica.

Costa Rica is generally considered one of the safer destinations in Central America. However, TripTogether.com recommends that travelers should avoid going out late at night alone. Always be cautious and alert.

Covic recommends a one- to three-month lead time when planning a getaway as many activities/excursions book up in advance, so it might not be ideal for a last-minute getaway, but is something to keep in mind as you comparison-shop for trips.

2. San Diego

San Diego doesn’t require an international flight for U.S. travelers, and averages a mild 67 degrees in winter, making it a great in-country getaway. And hotel prices now are very affordable, Covic said.

“San Diego is a great travel location for couples or families,” Covic said. “We recommend attractions such as Sea World, Legoland and the San Diego Zoo. The Gaslamp District in downtown San Diego provides a fun and exciting night life.”

In terms of safety, note the surf advisories in San Diego, especially during the winter months.

Booking flights to San Diego is easy, so it’s a great long-weekend destination, especially if you’re able to find last-minute booking deals and/or airfare and hotel packages.

3. Puerto Rico

Winter in Puerto Rico is warm enough for visits to the beach, and you can avoid the large crowds that come here during the high season.

“Puerto Rico is a very romantic destination,” Covic said. “However, families also can enjoy visiting the rain forest, the beaches … there’s sight-seeing galore.”

In terms of safety, as in any travel destination, be aware of your surroundings. If you do not feel comfortable in any area, you probably shouldn’t be there.

Because Puerto Rico is a U.S. territory, U.S. citizens don’t need a passport to travel there, just the same photo ID you’d use to fly domestically. Last-minute travel deals can be found, but Covic recommends taking at least one or two months to plan the perfect trip.

4. Thailand

Thailand is exceptionally budget-friendly no matter what time of year, Covic said, but noted that the off season from May to September is cheapest.

“Bangkok is a great place for couples looking to have fun, while there are a plenty of islands in Thailand that are great for families and couples looking to relax,” Covic said.

In terms of safety, many tourists are subject to pickpocketing especially when browsing a crowded market, so it’s a good idea to be aware of your surroundings and make sure your valuables are secured.

How to Save on Travel

If you aren’t opposed to the idea of group tours, some companies offer great tour deals through Thailand and other countries. For example, SmarTours offers all-inclusive, two-week group tours of Thailand, South Africa, Colombia, Peru, and India for, in many cases, under $2,000.

“We always build in a lot of free time, so that creates the opportunity to ‘escape’ from the group if people would like,” Greg Geronemus, Co-CEO of SmarTours, said.

You could also potentially save on travel by signing up for fare alerts, being flexible with travel dates and looking into alternative accommodations, like hostels or vacation rentals. You may also be able to save with a travel credit card — rewards can be put towards airfare and/or hotel stays and some offer ancillary perks, like a free checked bag on your flight or free hotel Wi-Fi. You can find a list of the best travel credit cards here. Just be sure to check your credit before applying for any new plastic. You’ll want to make sure your credit score can qualify you for the best terms and conditions and you should also see if it can handle the hard inquiry generated by a credit card application. You can view your two free credit scores each month on Credit.com.

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