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Understanding personal bankruptcy rates by state

dcCred — Fri, 17 Jun 2022 18:26:02 +0000

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Personal bankruptcies rates have remained historically low in the past few years. Read on to find out bankruptcy rates by state, what you should do if you’re facing bankruptcy and how to maintain good credit.

How to understand bankruptcy rates

When discussing bankruptcy, it’s important to know that there are several main types of personal bankruptcies.

Chapter 7: Requires asset liquidation and is mostly used by individuals who don’t have sufficient funds to pay off their debt. It offers the complete elimination of certain types of existing debt.

Chapter 13: Reserved for individuals with a regular income. It stipulates a debt repayment plan not to exceed five years.

The simplest way to understand bankruptcy rates is that they represent the number of people who—for whatever reason—were unable to pay their debt and sought relief. Most filers choose either Chapter 7 or Chapter 13, depending on their personal circumstances.

Chapter 7 allows for the discharge of certain types of debt without repayment but may result in asset forfeiture. Conversely, Chapter 13 requires a payment plan and in exchange, filers can typically retain ownership of certain assets, such as their home.

What does the bankruptcy landscape look like in 2022?

After rising steadily from the 1980s to the early 2000s, bankruptcy rates hit a new record in 2005 at over 2 million cases. Since then, the numbers have largely declined, and in 2021, fewer than half a million bankruptcies were filed. This downward trend has continued through early 2022, with bankruptcy rates remaining lower than in previous years.

However, bankruptcy rates are starting to inch back up after historic declines. With pandemic-related aid receding and inflation rising, households are feeling the squeeze, and bankruptcy rates are expected to continue to rise throughout 2022.

Bankruptcy rates by state

These are the bankruptcy rates by state for 2021, according to the American Bankruptcy Institute. In 2021, there were a total of 397,069 bankruptcies filed. *Cases included in totals reference commercial business as part of bankruptcy petition filing.

State	Cumulative 2021 Filings	Chapter 7 Ratio	Chapter 13 Ratio
Alabama	14,716	39%	61%
Alaska	214	86%	12%
Arizona	9,353	85%	14%
Arkansas	5,256	52%	47%
California	39,505	86%	13%
Colorado	6,281	80%	19%
Connecticut	2,947	86%	13%
Delaware	1,623	48%	18%
Florida	30,685	72%	27%
Georgia	20,830	47%	52%
Hawaii	1,187	72%	28%
Idaho	1,930	90%	9%
Illinois	20,343	70%	29%
Indiana	13,962	69%	30%
Iowa	2,765	89%	10%
Kansas	3,445	57%	42%
Kentucky	8,647	65%	35%
Louisiana	5,790	37%	62%
Maine	629	86%	12%
Maryland	8,078	73%	26%
Massachusetts	3,368	71%	27%
Michigan	16,056	78%	21%
Minnesota	5,645	82%	17%
Mississippi	5,997	56%	43%
Missouri	9,527	65%	35%
Montana	613	85%	14%
Nebraska	2,522	74%	25%
Nevada	6,802	89%	10%
New Hampshire	729	81%	18%
New Jersey	9,977	73%	25%
New Mexico	1,400	89%	10%
New York	14,292	85%	12%
North Carolina	6,409	45%	53%
North Dakota	521	91%	8%
Ohio	20,306	80%	19%
Oklahoma	5,731	88%	12%
Oregon	4,550	82%	18%
Pennsylvania	10,122	67%	32%
Rhode Island	937	83%	16%
South Carolina	3,339	47%	52%
South Dakota	590	88%	10%
Tennessee	15,122	49%	50%
Texas	19,308	63%	32%
Utah	5,473	66%	34%
Vermont	271	82%	16%
Virginia	12,245	66%	33%
Washington	5,797	81%	18%
West Virginia	1,611	88%	11%
Wisconsin	9,094	72%	27%
Wyoming	529	91%	6%

The first thing to consider when you’re facing bankruptcy is to consider alternative steps you can take to avoid filing for bankruptcy if you’re struggling to pay your debt.

Things to consider if you are facing bankruptcy

1. Debt settlement

A debt settlement is an agreement you make with your creditors to reduce the balance owed and pay a lump sum as opposed to monthly installments. This is an alternative to bankruptcy that is generally reserved for unsecured debts, such as credit cards and medical bills. Generally, secured debts are ineligible for settlement.

Debt settlement often facilitated by a for-profit company that charges a fee on the original debt amount and then serves as an intermediary between you and the original creditor by collecting payment and holding the money in escrow. The debt settlement company negotiates on your behalf to secure more favorable repayment terms and conditions.

2. Debt consolidation

Debt consolidation is the process of combining multiple debts into one and refinancing at a lower interest rate. This type of refinancing works for high-interest unsecured debts, such as credit cards. You can effectively achieve debt consolidation by either taking out another loan to cover your debt or by borrowing against other assets, such as your home or your 401(k).

3. Hire a lawyer

A lawyer is one expense you don’t want to spare when facing bankruptcy. A bankruptcy lawyer can guide you through the process of filing for bankruptcy and help you understand what to expect. They’ll gather information about your financial situation and represent you at any hearings related to your case.

4. Prepare for credit counseling

Before you can file for most bankruptcies, you’ll need to attend credit counseling, which is required by the U.S. Department of Justice. In this session, a certified credit counselor will “review your income and expenses, discuss alternatives and help you develop a personal budget.” (Debt.com)

Credit counselors also evaluate your ability to repay your debt and confirm your need to file for bankruptcy. The Department of Justice maintains a database of approved credit counseling agencies for individuals pursuing bankruptcy.

5. Understand the long-term consequences of filing for bankruptcy

While bankruptcy is almost never desirable, it’s not all bad news. Bankruptcy can provide a viable path out of overwhelming debt and offer relief from debt collectors’ persistent communication.

However, be aware that filing for bankruptcy doesn’t necessarily mean an automatic blank slate, and you may see negative impacts on your life and finances long after you file. These may include:

Difficulty renting an apartment or getting hired for a job
Your bankruptcy proceedings are public records and discoverable by anyone
Your credit will be adversely impacted for up to 10 years

How to work on your credit

No matter if you are considering bankruptcy or not, never forget that your credit can benefit from good money habits and staying in control of your finances. Here are a few helpful tips for working on your credit.

1. Set up automatic payments

Paying your bills on time is one of the oldest and most helpful tricks in the book for keeping your credit healthy. By turning on automatic payments, you can be sure you won’t miss a payment and get hit with a late fee, which can hurt both your bank account and your credit score. Some companies even offer you a discount for using automatic payments.

2. Become an authorized user on another account

You can benefit from a friend or family member’s healthy financial practices by becoming an authorized user on their account. The basis of this method is that your credit gets a boost by them simply keeping on top of their bills while you’re connected to their account. Make sure the person you choose has a strong credit history and that they report you to the credit bureaus as an authorized user. Who can be added varies by creditor, so this isn’t an option for everyone.

3. Leave old accounts open

Even if you’re no longer using a credit card, it may still make sense to keep the account open. Doing so could help bolster your credit score by increasing the amount of credit you have available and decreasing your credit utilization ratio. Generally speaking, the longer an account is open in good standing, the more it helps your overall credit history.

As bankruptcy rates rise, you can avoid becoming another statistic by developing effective ways to manage debt or stay out of it entirely. Cultivate positive financial habits and consider working with CreditRepair.com to use their experience to help get your credit back on track.

The first thing to consider when you’re facing bankruptcy is to consider alternative steps you can take to avoid filing for bankruptcy if you’re struggling to pay your debt.

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

The post Understanding personal bankruptcy rates by state appeared first on CreditRepair.com.

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Personal Credit Scores & Business Loans

dcCred — Tue, 01 Feb 2022 23:54:27 +0000

Will Your Personal Credit Score Affect Your Business Loan Application?

Congratulations! You’ve decided to begin the process of applying for a small business loan. This is an exciting time for your new or existing company and could forecast many great things.

If this is your first time applying for a business loan, you might not be aware of the potential barriers that can get in your way. After all, receiving a business loan for your start-up or expansion can be competitive, and banks want to ensure that they trust only the best with their investments. Before you jump all in, you’ll want to have a clear understanding of the things that could qualify or even disqualify you from receiving funding.

One of these factors is your personal credit score.

If you are a small business owner in the United States, the three credit bureaus track two profiles: your personal financial history and your business credit history. Each profile plays a vital role in getting approved for a business loan. However, if your starting a new business or your existing business doesn’t have established business credit, the lender may rely more heavily on your personal creditworthiness when making their lending decision.

While your personal credit score and business credit profile express different information about you and your business, both have a substantial impact on the options available to your business and your ability to qualify for a loan.

Why Lenders Care About Your Personal Credit Score

Some business owners don’t think that their personal credit score has much of an impact when it comes to their organization. This just isn’t the case. A potential creditor is going to consider your personal credit score when making a decision to grant your company a business loan.

In general, a potential lender is going to view your credit score to determine if you:

Have the ability to repay the loan?
Are going to repay the loan?
Will pay the loan even if something unexpected happens?

Lenders see your credit score as an insight into your financial health and responsibility. Unfortunately, if a lender sees that you are not able to manage your personal finances, they may assume that you are a high risk for managing business finances as well. This is especially true if you are a new business owner. Without an established business history or credit to your company’s name, the only way the lender will be able to determine creditworthiness is by accessing your personal credit score.

How is my credit score calculated?

Three primary credit bureaus generate a credit score for lenders to access. Each reporting agency uses the same basic FICO formula to score the information that they collect. They also obtain personal information such as full legal name, date of birth, employment history, address, etc. They also list a summary of information that was provided to them by your creditors. Other information found in public records like bankruptcy or judgments are also included on your credit report and factored into your score. Each time that you apply for credit is also recorded on your report.

There are primary differences in the way that the three credit bureaus review and calculate your personal credit history. For example, Transunion holds more detail about your employment information, Equifax separates your accounts that are open and closed, and Experian will record data like whether or not you are paying your rent and other bills on time. Essentially, these agencies are competitors, and lenders may choose to report to one bureau and not the other. While their data might include different results, their score is typically similar.

Importance of a Good Credit Score For Your Business

While you may not feel that your personal credit history is the best representation of how you will meet and exceed your business’s financial obligations, the need to establish and maintain a positive credit score is vital for every small business owner. Most banks and lenders take a close look at your credit score when they evaluate your worthiness as a business borrower and even consider the score in their decision-making process – regardless of how long your business has been operating.

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How to get a personal loan with a cosigner: what to know first

dcCred — Sat, 29 Jan 2022 23:19:26 +0000

Disclosure regarding our editorial content standards.

When applying for a personal loan, there are a few things to take into consideration before submitting your application, such as your approval odds. If the odds aren’t looking like they’ll work out in your favor, you may want to consider asking a cosigner to apply alongside you.

A cosigner could help increase your chances of approval, especially if your credit score isn’t looking too hot. Learn more about how to get a personal loan with a cosigner and what it may mean for your approval odds.

What is a cosigned personal loan?

A cosigned personal loan is a loan you apply for alongside someone else (a relative, trusted friend or mentor) who consents to paying the loan back with the primary borrower (you). A cosigner who has good credit, financials and a positive lending history may be able to help increase your chances of loan approval.

Often, this means they take responsibility for paying partially or in full any payments you can’t make on your own.

Joint personal loans and co-borrowers

A joint personal loan (loans awarded to two or more people) requires a co-borrower to apply alongside you who will also have responsibility for the loan.

The major difference between a co-borrower and a cosigner is that a cosigner applies with you to certify that they will take on payments only if you’re unable to. A co-borrower, in contrast, must apply for the loan alongside you and has equal responsibility to pay back the joint personal loan. They can make payments just like you do.

Should you get a personal loan with a cosigner?

You could consider getting a personal loan with a cosigner if you want to benefit from a trusted associate’s good credit score and if you trust them to help you if you can’t make the loan payments. Having a cosigner is not required to apply for a personal loan. If your credit score and history is in good shape and there’s nothing in your financial background that may signify you wouldn’t be a responsible borrower, you should be able to apply alone.

The only time you’ll be required to have someone apply for a loan with you is if you’re applying for a joint personal loan, where you’ll need a co-borrower to complete the application.

When you should consider a cosigner

Though having a cosigner isn’t required to apply for a loan, it may be worthwhile to consider one if you have had a troubled credit or financial history. The following are situations where a cosigner can increase your loan approval odds.

Bad credit or lending history

Lenders look at your credit history as an indicator of whether or not you’re a responsible borrower and if you’re able to make payments on time. If you have a low credit score (typically anything under 670) or have something on your credit report that would indicate you’ve had trouble making past payments, you may want to consider a cosigner.

Having a cosigner with a high credit score can help your approval odds by signaling to lenders that, together with your cosigner, you have a positive borrowing history. Be sure to let your cosigner know that a loan application often requires a credit inquiry that may temporarily drop their credit score.

Low monthly income

A low income may signal to lenders that you don’t have the means to make your required payments each month, which could hurt your approval chances.

Collateral assistance

Collateral is something that a lender holds for you to secure your payment and make sure you will make payments in full. This can include things like the deed to your home or car, fine art or jewelry you own, or even your paycheck.

Collateral has become less common for lenders, but if the loan you’re applying for does need collateral that you don’t have, a cosigner could be able to help. Be sure your cosigner understands that the collateral they put up on your behalf could end up being seized by the lender in case you’re unable to make payments.

How to find a cosigner for a personal loan

Once you’ve decided to apply for a loan with a cosigner, it comes time to find the right person to ask to cosign. Read on for how to find the best cosigner to increase your loan approval chances.

It’s important to note that no loan is ever guaranteed to get approved, no matter your or your cosigner’s credit score and financial history.

Ask someone trustworthy and financially secure

Ideally, your cosigner is someone you know personally and have a mutually trusting relationship with. Cosigning does involve some sort of financial commitment, so consider asking someone with whom you have a strong enough relationship to survive a financial risk—such as a close family member. This could also be a close friend or coworker.

Since your cosigner is signing on to improve your approval chances, you should look for someone with a high a credit score, comfortable monthly income and low existing personal debt. Though there are no rules about what your cosigner’s credit score, financial history or income should look like, any score in the “very good” to “excellent” credit range of 740 to 800+ can show lenders that they’re a responsible borrower.

Have a plan to pay your loan

Once you’ve identified someone who would be a good fit as a cosigner for your loan, you should consider putting together a fact sheet with everything your cosigner should know before they agree to cosign for you. Ideally, this should include how much the loan is (including the interest rate), what you’ll be using it the loan for and what your repayment strategy is.

You should also have an open, honest discussion about the risks of cosigning and what happens if you’re unable to make a payment. Will your cosigner pay on the loan and you pay them back? Will they cover a certain amount of payments before you take them on?

Being upfront about what you need out of a cosigner, even if it’s just their good credit score, can help avoid some awkward or frustrating conversations down the road. It also lets your cosigner know exactly what they’re responsible for so they can decide whether or not they can take on that responsibility.

When it comes to taking out a loan, it’s always important to do your research and be prepared. Whether or not this means having a cosigner for your personal loan is up to you and your exact financial situation. However, be sure to prioritize your financial goals in getting your credit in good shape before applying.

Reviewed by Upuia Sagapolu, Credit Consultant at CreditRepair.com.

Upuia Sagapolu has worked in credit repair for over 17 years. She has a great wealth of knowledge and wisdom concerning the credit repair process. Upuia champions herself as a strong advocate assisting all hard-working Americans towards increasing their credit scores and achieving their financial goals. She is a firm believer that having great credit is essential to a person’s credit journey, which is their financial power that leads to their financial freedom.

Note: The information provided on CreditRepair.com does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only.

The post How to get a personal loan with a cosigner: what to know first appeared first on CreditRepair.com.

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