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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

There isn’t a specific debt threshold you must meet to file for Chapter 7 bankruptcy, but you must meet certain criteria to qualify for it under the means test, which may consider income from the last six months and compares to the median income in your county for your family size.

The world of personal finances can be difficult to navigate, and unexpected events occasionally result in stressful debt. Sometimes people consider declaring Chapter 7 bankruptcy as a way to get some relief from their debts. Chapter 7 is a legal process that can provide a fresh start by discharging certain debts, but it’s essential to understand the requirements and implications.

How much do you have to be in debt to file Chapter 7? Since everyone’s financial history and situation varies, there is no absolute amount required to file Chapter 7—but there are criteria.

In this guide, we’ll cover the factors that determine eligibility for Chapter 7 bankruptcy as well as the benefits of filing, things to consider before you file, alternatives to filing and tips to help you avoid bankruptcy.

Table of contents:

  • Signs that filing for bankruptcy could be an option
  • How to know if you’re eligible for Chapter 7
  • Benefits of Chapter 7
  • Things to consider before filing Chapter 7
  • Chapter 7 alternatives
  • 7 tips to avoid Chapter 7 

Signs that filing for bankruptcy could be an option

Filing for bankruptcy is a significant and complex decision that you should base on careful consideration of your financial situation and options. Here are signs that you may be eligible for Chapter 7:

  • You’re dealing with an overwhelming amount of debt.
  • Bill and loan payments are being missed consistently.  
  • Creditors are threatening to take legal action, wage garnishment, foreclosure or repossession of your assets.
  • You’re facing lawsuits due to unpaid debts.
  • Emergency funds and savings have been depleted.
  • You’re at risk of losing essential items such as your home or car.

How to know if you’re eligible for Chapter 7 

Even though there’s no debt threshold for filing for Chapter 7, there are still other criteria that need to be met to determine if you’re eligible. Here are some key qualifications you likely need to meet:

  • You are filing as a person, a partnership, a corporation or other business entity.
  • You haven’t been discharged from bankruptcy in the previous eight years.
  • You have received credit counseling through the court within the last six months.
  • You’ve taken and passed the means test, or you have an exemption from the test.

Learn more about the Chapter 7 means test below.

Chapter 7 means test 

During the Chapter 7 means test, your average monthly income over the previous six months is compared to the median income in your county. This test is a crucial factor in determining your eligibility—the court will essentially compare your financial situation to other similar-sized households in your area.

Typically, someone can qualify for Chapter 7 if their income is lower than the state median. If your income is above the median in your state, there are further calculations to determine whether or not you have enough money to pay off your bills under a Chapter 13 repayment plan.

Note: You’ll want to work with an experienced bankruptcy attorney to ensure accurate calculations and proper application of the test to your specific financial situation.

Benefits of Chapter 7

Chapter 7 offers several benefits to individuals overwhelmed by debt and seeking a fresh financial start. Here are some of the key benefits of Chapter 7 bankruptcy:

Potential debt discharge

The primary advantage of Chapter 7 is the potential bankruptcy discharge of most unsecured debts, such as:

  • Debt from your credit cards
  • Bills from medical-related expenses
  • Personal loans

Now that the bankruptcy process is complete, the debtor is no longer legally obligated to repay those discharged debts.

Avoid a lengthy process

In general, the Chapter 7 bankruptcy process is faster than the Chapter 13 bankruptcy process. Filing time for Chapter 7 usually takes around four to five months from the filing of the bankruptcy petition to the discharge of eligible debts.

Obtain automatic stay

An automatic stay is put into place after someone files for Chapter 7 bankruptcy. This action immediately puts a stop to all creditor collection actions, including:

  • Foreclosure
  • Wage garnishment
  • Repossession
  • Creditor harassment

Get a fresh start

Chapter 7 bankruptcy provides a clean slate for individuals that are having a hard time keeping up with payments. Once eligible debts are discharged, debtors can work on rebuilding their finances without the burden of old debts.

Relief from unmanageable debt

Chapter 7 bankruptcy is ideal for individuals with little or no disposable income to make regular payments under a Chapter 13 repayment plan. It’s designed to provide relief for those facing severe financial hardship.

Receive financial education

Those filing for Chapter 7 must attend credit counseling before they file and a financial management course before receiving a discharge. These courses can provide valuable financial education and help debtors make more informed decisions in the future.

Things to consider before filing Chapter 7 

Filing for Chapter 7 bankruptcy is a big financial decision that could have long-term implications. Explore everything you should consider before filing Chapter 7 below.

Financial and employment situation 

Evaluate the severity of your financial distress and employment situation. The best candidates for Chapter 7 bankruptcy are often those with excessive unsecured debt and little disposable income to make payments.

Having a hard time keeping up with payments due to unemployment can make you more eligible for Chapter 7 bankruptcy. However, if you’re still struggling to pay your bills while employed, filing for Chapter 7 may help you keep your assets, such as your house and car, by eliminating or decreasing payments on:

  • Credit cards
  • Medical bills
  • Unsecured debts

Court costs 

It’s important to factor in the costs to file for bankruptcy, including attorney fees and court filing fees. A court filing fee for a new petition costs around $338. While it might seem like an additional expense, an experienced attorney can help you navigate the process effectively.

Credit impact 

Be aware that filing for Chapter 7 bankruptcy could impact your credit negatively. There’s a chance it will stay on your credit report for up to ten years. However, if your credit is already damaged due to missed payments, the impact might not be as drastic.

Consult with a qualified bankruptcy attorney to discuss your specific financial situation. An attorney can help you consider your options, navigate through the process and make the most informed decision possible. Plus, you could get valuable information about your case that you wouldn’t have thought of otherwise.

Chapter 7 alternatives

Consider investigating other possibilities to resolve your financial troubles before filing for Chapter 7 bankruptcy. Here are several alternatives to Chapter 7 bankruptcy:

Chapter 13 bankruptcy

Chapter 13 is an option for individuals with regular income to restructure their debts. It entails developing a repayment strategy that can last up to five years to progressively repay creditors.

This provides protection from creditor actions like foreclosure and repossession. It  allows debtors to catch up on missed payments while keeping their assets. Compared to Chapter 7, Chapter 13 may be a better option if you’re employed and still able to pay down debt but need an extra boost to pay it down. 

Debt negotiation and settlement

You might be able to negotiate a lower settlement price for your debts by speaking with your creditors directly or with the assistance of a debt settlement firm. This can lead to reduced payments but could also lead to negative consequences for your credit.

Debt consolidation loan

Taking out a debt consolidation loan to pay off multiple debts can simplify payments and potentially lower interest rates. However, it’s important to be cautious about converting unsecured debt into secured debt (like a home equity loan) that could put your assets at risk.

7 tips to avoid Chapter 7 

Avoiding Chapter 7 bankruptcy requires proactive financial management and strategic decision-making. Here are some tips that might help you steer clear of the need to file for bankruptcy:

  1. Create a budget: Prioritize making a budget for your finances to help lower your risk of debt. Tracking your expenses can be a great way to see areas where you can cut back and use the extra money to pay back debts.
  2. Pay off debt first: Paying down your debt amount should be the first priority. Consider using the debt avalanche method to speed up the debt repayment process.
  3. Negotiate with your creditors: If you’re having trouble making payments, contact your creditor to see if you can work out a better deal. They might be open to lowering interest rates, cutting monthly payments or establishing a repayment schedule.
  4. Start an emergency fund: An emergency fund helps provide padding for you if you are stuck with surprise expenses, which can help you avoid using credit cards or loans.
  5. Start selling: Sell items you no longer need for extra cash to pay down your debt. Plus, you can clear out clutter in the process.
  6. Get a side hustle: Consider finding another source of income, like a side hustle or a second job.
  7. Ask for help: Connect with a financial advisor or credit counselor—they can provide personalized guidance and create a plan tailored to your circumstances.

If you think you may be facing bankruptcy, you may also want to start taking a look at your credit. In this case, consider working with the credit repair team at Lexington Law Firm. They can work with you to address inaccurate items listed on your credit reports, so you can focus on building healthy money habits in the long run. You can also get a credit snapshot that gives you your credit score, credit report summary and repair recommendations for free. 

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Reviewed By

Vince R. Mayr

Supervising Attorney of Bankruptcies

Vince has considerable expertise in the field of bankruptcy law.

He has represented clients in more than 3,000 bankruptcy matters under chapters 7, 11, 12, and 13 of the U.S. Bankruptcy Code. Vince earned his Bachelor of Science Degree in Government from the University of Maryland. His Masters of Public Administration degree was earned from Golden Gate University School of Public Administration. His Juris Doctor was earned at Golden Gate University School of Law, San Francisco, California. Vince is licensed to practice law in Arizona, Nevada, and Colorado. He is located in the Phoenix office.

Source: lexingtonlaw.com

Apache is functioning normally

Apache is functioning normally

Flexibility can be a real asset in a career. Maybe you’re young and figuring out your post-graduation path. Or you’re busy balancing the demands of running a home and caring for a family. Or you’re an athlete who needs plenty of time for training and recovery.

There are lots of flexible-schedule jobs out there, if you know where to look. Let’s check out some part-time jobs with flexible schedules.

What It Means for a Job to Have a Flexible Schedule

Whether you’re in college or caring for children or pursuing an unpaid passion, there are many reasons why someone would want some flexibility in their career.

But what does a flexible schedule mean exactly? According to the U.S. Department of Labor, a flexible schedule is one that allows people to work outside traditional 9 to 5 office hours. Aside from that, situations vary depending on the role and employer.

Workers may be able to choose the time they arrive at and depart work, for instance. With certain flexible work policies, employees still have to work a set number of hours per pay period or be available during a daily “core time.” So while the employee may not have to show up at 9am on the dot and leave at exactly 5pm, they may need to at least show up by 11am and stay until after 3pm. However, this type of shortened schedule could work for many people, including parents who are self-employed.
💡 Quick Tip: We love a good spreadsheet, but not everyone feels the same. An online budget planner can give you the same insight into your budgeting and spending at a glance, without the extra effort.

Tips for Finding a Flexible Part-time Job in 2023

Flexible part-time jobs can be logistical, analytical, creative, or involve a skilled trade. When it comes time to search for flexible-schedule jobs, keep in mind these tips.

•   Stay focused. Job applicants who know what they’re looking for and what they can offer an employer can plan a more effective job search. If someone knows they have to have a flexible part-time schedule in order to accept a job, they can save a lot of time and energy by only applying for jobs that offer that. Trying to convince an employer to change their staffing plans is an uphill battle.

•   Prepare to hear No. Know that it will take a while to find the right fit, and that rejection is a normal part of any job search. Psychologically preparing yourself can help you persevere until the right job comes along.

•   Don’t be a square peg. If a flexible part-time schedule is what matters most, you may need to be flexible yourself in other areas. For example, accept that you may need to compromise on title, salary, or industry. Giving up the highest-paying job for one with a more relaxed schedule can be worth it.

•   Go remote. Work-from-home jobs with flexible schedules can often be easier to find than on-site jobs that have flexible schedules. When reviewing online job boards, look for flexible schedule remote jobs.

Recommended: Does Net Worth Include Home Equity?

Why It Can Be Difficult to Find Part-time Jobs With Flexible Schedules

It can be difficult to find flexible-schedule part-time jobs because many jobs require being in a certain location at a certain time. For example, a hairstylist has to show up for work when they have appointments scheduled. A restaurant has to know they have enough servers on hand during operating hours. Even a corporate job where some work can be done remotely and independently can require being online during set times so that it’s easy to communicate with coworkers.

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Track your credit score for free. Sign up and get $10.*

Great Part-Time Jobs With Flexible Schedules

Perhaps someone wants to take on a second job to help them pay down their debt or save for a dream vacation. Whatever the reason, it’s easy to see the appeal of a part-time job with a flexible schedule.

While there are countless part-time jobs on the market that can suit a variety of workers’ desired schedules, these are some of the best flexible schedule jobs for Gen Zers and Millennials. And if you’re in college, don’t miss our list of the best on-campus jobs.

1. Landscaper and Groundskeeper

Average hourly wage: $17.39

Job description: Landscapers and groundskeepers typically set their own schedules and plan which days they’ll tend to a client’s yard, but they don’t have to tell them exactly what hour they’ll show up to do their work.

Requirements: In some areas a license may be required to use pesticides and fertilizers.

Schedule flexibility: 4

Duties:

•   Mowing lawns

•   Removing weeds

•   Planting and maintaining flowers, bushes, and trees

2. Recreation and Fitness Worker

Average hourly wage: $22

Job description: Running a fitness or recreation class can be fun and rewarding work that is often performed on a part-time basis. Many instructors can choose when they host their classes (like when their young child is in school), but they do have to stick to those times.

Requirements: Licensing or background checks may be required.

Schedule flexibility: 4

Duties:

•   Plan programming

•   Run classes

•   Clean up post-class

3. Freelance Software Developer

Average hourly wage: $37

Job description: Many businesses hire freelance software developers to create computer programs and applications for business or consumer use. Some meetings during business hours may be required.

Requirements: Knowledge of select programming languages.

Schedule flexibility: 4

Duties:

•   Write code

•   Test code

•   Meet with project stakeholders

4. Virtual Assistant

Average hourly wage: $34

Job description: Plenty of professionals can’t afford or don’t need a full-time assistant. Instead, they hire virtual assistants who can tackle administrative work for a few hours a week. Virtual assistance can be a rewarding job for introverts who are conscientious and organized.

Requirements: Office skills

Schedule flexibility: 4

Duties:

•   Scheduling meetings

•   Managing clients’ inbox

•   Helping with administrative work

5. Freelance Copywriter

Average hourly wage: $28

Job description: A writer can work with many different brands as a freelance copywriter and can choose when they want to take on new projects and what hours of the week they work on them. Working as a freelance copywriter is also a great side hustle.

Requirements: Bachelor’s degree and industry experience

Schedule flexibility: 5

Duties:

•   Research

•   Writing copy

•   Editing copy

6. Freelance Web Designer

Average hourly wage: $35

Job description: Freelance web designers work independently designing websites for a variety of clients, instead of a full-time job. Work-from-home web design can be a well-paying and fulfilling job for antisocial people.

Requirements: Knowledge of design programs, and HTML and CSS programing languages.

Schedule flexibility: 3

Duties:

•   Design web pages and sites

•   Code designs

•   Present to clients and incorporate feedback

7. Freelance Editor

Average hourly wage: $31

Job description: Similar to copywriters, editors can work freelance for multiple clients.

Requirements: Bachelor’s degree and industry experience

Schedule flexibility: 4

Duties:

•   Nurturing writers

•   Editing copy

•   Publishing content

8. Business Consultant

Average hourly wage: $37

Job description: A business consultant can offer services to multiple businesses who need support as a whole or who are looking to improve a certain area of their business, such as their marketing efforts, operations, or HR.

Requirements: Bachelor’s degree, master’s degree (more advantageous), or a certification from a business consultant association.

Schedule flexibility: 3

Duties:

•   Assess potential areas of improvement

•   Create improvement plans

•   Find ways to cut costs

💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

There are plenty of great flexible-schedule jobs that millennials and Gen Zers can pursue to give them the time they need to attend school, start a business, or take care of young children. Some remote freelance roles can be entirely flexible — such as web designers, writers and editors — while other jobs require your presence during certain core hours.

Choose whether you prefer a more physically demanding job — such as landscaper or fitness worker — or an office job that requires a laptop (like virtual assistant). It may take time to find the right position, so be patient. It’s also a good idea to keep an eye on how your money comes and goes to ensure you’re sticking to your savings goals.

Take control of your finances with the SoFi Insights money tracker app. Connect all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

SoFi helps you stay on top of your finances.

FAQ

What part-time job has the most flexible hours?

There is no single part-time job that has the most flexible hours. That said, jobs where work can be done independently and remotely usually have the most flexibility. Jobs like working as a freelance writer or graphic designer are good examples of jobs someone can usually do during times that work well for them.

What job gives you the most free time?

Flexible-schedule work-from-home jobs can give workers the most free time because they don’t have to worry about a commute. It’s also usually easier to control your work schedule when you work from home. As a bonus, you can use your breaks to be productive — by tackling household chores or working out — or enjoy down time.

What jobs can I make my own hours?

Some jobs with flexible schedules allow workers to set their own hours. The key is to look for a job where the hours someone works doesn’t matter as much as the type of work they produce.

Photo credit: iStock/Eva-Katalin

SoFi’s Insights tool offers users the ability to connect both in-house accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL1023004

Source: sofi.com

Apache is functioning normally

Apache is functioning normally

This correlation between the average cost of living and credit card limit continues when we look at the 10 states with the lowest average credit card limit. In the chart below, the states marked with an asterisk are also on the list of states with the lowest cost of living.

State

Average Credit Card Limit

Average Credit Score

Mississippi*

$21,676

667

Arkansas

$24,570

683

West Virginia*

$24,684

687

Alabama*

$25,621

680

Louisiana

$25,781

677

Kentucky

$25,962

692

Oklahoma*

$26,041

682

Indiana*

$26,676

699

Idaho

$26,871

711

Iowa*

$27,052

720

Source: Experian, Wisevoter

How Are Credit Card Limits Determined?

Credit card companies use several factors to determine your limit, which they review periodically over time. Some factors count more than others, varying by the credit card issuer. 

Your Credit Score

A higher credit score indicates you are more likely to pay your debts, which tells credit card issuers you are lower-risk. As a result, people with higher credit scores often have higher credit card limits. 

According to FICO®, a variety of factors determine credit scores, including:

  • Payment history: Your payment history determines 35% of your credit score, which shows how likely you are to pay your debts on time. 
  • Credit utilization rate: Your credit utilization rate is the ratio of the debt you owe to the total amount of credit available to you. You can factor your credit utilization rate by dividing your current balance by your total credit limit and multiplying the result by 100. A healthy credit utilization rate is considered anything below 30% —any higher and potential lenders may consider you overextended.
  • Length of credit history: The longer your credit history, the better picture a lender has of your risk level. A short history isn’t necessarily bad unless it contains a poor payment history and high utilization rate.
  • Recent hard inquiries: A hard inquiry is a record of a lender checking your credit. Too many hard inquiries in a short period can lower your credit score temporarily, so experts recommend six months between hard inquiries. 

Credit card companies also use your credit score to determine your interest rate, so keeping an eye on your score with free credit reports is important. 

Monthly Income

Credit card issuers want to know if you have monthly income to ensure you can pay your debts. The higher your monthly income, the more likely you are to get approved for a higher credit limit.

Monthly Expenses

Credit card companies look at your total monthly expenses, especially compared to your monthly income. Generally, they’ll look at your monthly housing costs (mortgage or rent), although they may also ask for information about other regular expenses such as utilities. Your monthly expenses are then compared to your monthly income to determine your credit card limit.

High monthly expenses won’t hurt your credit card limit as long as your monthly income is high enough to cover them.

Debt-to-Income Ratio

Credit card issuers also examine your debt-to-income ratio when determining your credit card limit. Experts consider anything under 36% to be a good debt-to-income ratio for a credit card.

To calculate your DTI ratio, divide your total recurring monthly debt (mortgage, auto loan, student loans, existing credit card debt, etc.) by your gross monthly income (how much you make before taxes) and multiply the answer by 100.

Your History with the Issuer

If you already have a positive credit history with the company issuing the credit card, they may be more likely to give you a higher credit limit. However, if they feel you have too many cards or a rocky credit history with them, they may issue a lower credit limit.

The Issuer’s Credit Approval Policies

Every credit card company wants to avoid risk and crafts a specific set of policies to determine how much credit to extend to a cardholder. Its policies may consider elements not listed here or weigh factors differently than another company, which is why credit card limits are not standard across companies.

Current Economic Outlook

When the economy is healthy, credit card companies may be more open to taking risks and offer higher credit card limits. However, when the economy is uncertain, such as during the pandemic, issuers are less likely to take risks, offering lower credit card limits for new cardholders.

How to Get a Higher Credit Limit

A low credit card limit isn’t necessarily bad, but it can make getting approval for additional loans or credit challenging if your credit utilization rate is too high. It can also put large purchases, such as an appliance or unexpected car repair, out of reach. 

To get a higher credit card limit:

  1. Call your credit card issuer and ask for an increase. Call the customer service number on the back of your card and ask the representative for a higher credit card limit. Only consider this if you are trying to lower your credit utilization rate to raise your credit score. They look for six months of on-time payments and will ask for updates on your annual income, employment status, and monthly expenses before deciding.
  2. Increase your income. Since monthly income is a factor in your credit limit, increasing your monthly income can boost your credit card limit. Ask for a raise at work, get a second job, or start a side hustle. When your credit card issuer sees you have more income, they may offer you a higher credit limit. You can update this information with them anytime by contacting them directly, or you can wait until they discover it in a periodic review of your status.
  3. Build your credit. Pay your bills on time and pay down debt to increase your credit score. Over time, your credit score should increase, which can lead your credit card issuer to raise your credit limit.
  4. Transfer the balance from one card to another. Some credit cards allow you to transfer debt from one account to another in a credit transfer. If you have multiple credit cards and one allows credit transfers, transfer the debt from one card to another. This won’t increase your credit card limit overall, but it can increase the amount of credit available on a specific card.
  5. Increase your deposit on a secure credit card. If your card is a secured credit card, your credit card limit directly correlates to your security deposit. Add more to your security deposit, and you’ll have a higher credit card limit.
  6. Open another credit card. This won’t increase the credit card limit on your current card, but it will expand how much credit is available to you. Avoid temporarily dinging your credit score by waiting six months between credit card applications.
  7. Wait. Most credit card companies annually review your account, and as long as you pay your bills on time, they can likely naturally increase your credit card limit.

You can also always pay off purchases immediately rather than waiting until the end of your payment period to gain access to more credit without increasing your credit limit.

Credit scores strongly indicate what your potential credit card limit will be, so learn more about yours today. Before applying for a new credit card, get a sense of where you stand with a credit report card. Then use the tools and features in ExtraCredit to see where you need to work toward your credit goals to qualify for a higher credit card limit.

FAQ

Here are some answers to common questions regarding credit card limits.

What Happens if I Go Over My Credit Limit?

If you try to make a purchase over your credit limit, most credit card companies will deny the transaction. Some may allow the purchase but charge a fee, although most companies have abandoned this practice.

If I Request an Increase to My Credit Limit, Will That Impact My Credit Score?

When you request an increase to your credit card limit, your credit score may drop if your credit card issuer places a hard inquiry on your credit score. This can temporarily lower your credit score, and not all credit card companies do so. 

Source: credit.com

Apache is functioning normally

Apache is functioning normally

If you decide to file for bankruptcy, you must next decide which type of bankruptcy is right for you. Most individuals have three options, and understanding Chapter 11 vs. Chapter 13 vs. Chapter 7 is important in making the right decision. 

Bankruptcy can be complex, and even a small mistake in how you file can substantially change the outcome of your case. It’s typically a good idea to consult an experienced bankruptcy lawyer before you file a bankruptcy petition. However, we’ve provided some basic answers below to the question, “What is the difference between Chapter 7, 11, and 13 when it comes to bankruptcy?”

In This Piece

Understand the Types of Bankruptcy

Bankruptcy is a way to reorganize your debts or get your debts dismissed because you’re insolvent. “Insolvent” is simply a financial state where you can’t pay your bills—usually because your debts outpace your income. 

People can end up in this situation for a number of reasons. It may be that you lost your job or had reduced income—job losses due to the COVID-19 pandemic are just one example of when this can happen. In other cases, people have unplanned expenses such as medical bills that can put them over the edge financially. Bankruptcy does have some benefits, such as potentially putting a stop to wage garnishments or foreclosures. 

Regardless of how you ended up in this position, it’s important not to jump immediately to bankruptcy. Consider all of your options and speak with an experienced bankruptcy attorney to understand whether bankruptcy will help you.

How Do You Know Which Bankruptcy Type is Right for You?

This is a complex personal or business finance question. Consider talking to an attorney to understand your financial and legal situation. An experienced attorney can quickly apply means tests and other information to your case to help you understand what your options are.

What Is Chapter 11 Bankruptcy?

According to the United States Courts, individuals and business entities can enter into Chapter 11 bankruptcy. Typically, this type of bankruptcy is a reorganization of a business. Through the bankruptcy, the debtor restructures and then creates and implements a plan to pay back creditors.

The plan must be approved by a Trustee appointed by the court. The Trustee is typically in charge of implementing and overseeing the plan, ensuring that the business has the income and resources to follow through with it. Once the plan is completed and confirmed, any remaining debts under the bankruptcy are discharged.

This is an extremely simple summary of how a Chapter 11 bankruptcy works. In reality, they can take years and involve numerous legal proceedings on behalf of the person or business filing as well as the Trustee and creditors. 

What Is Chapter 7 Bankruptcy?

The main difference when it comes to Chapter 7 vs. Chapter 11 bankruptcy is that Chapter 7 is a liquidation plan. That means there’s no repayment plan associated with a Chapter 7 bankruptcy.

When you file Chapter 7, you typically agree to liquidate your assets to pay off as much of your debt as you can. The remaining debts that are part of your bankruptcy are dismissed. 

Whether or not you can file for this type of bankruptcy is determined by income. If your income is below the median for the state you’re filing in, you can probably choose Chapter 7 bankruptcy. If your income is above the state minimum, you must pass a “means test.” A bankruptcy attorney can quickly apply these tests to help you understand whether you meet eligibility for Chapter 7. 

You don’t have to give up everything you own in a Chapter 7 bankruptcy, though. You may be able to keep exempt assets, which can include certain personal belongings. You may also be able to keep your home, a car, and other items, even if you owe money on them, if you can continue to make timely payments on those debts. 

Again, bankruptcy is a complex process and what you can keep and how your proceeding goes is based on a variety of factors. Consult an experienced bankruptcy attorney to find out more about your individual situation.

What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy may sound similar to Chapter 11 because these both involve repayment plans. But when it comes to Chapter 11 vs. Chapter 13, the biggest difference is that Chapter 13 allows someone with regular income to make an adjustment to how they pay back some debts.

Chapter 13 may be an option for individuals who fail the means test for Chapter 7. Typically, Chapter 13 bankruptcy works for people who have stable income to make some payments on debts but they don’t have enough income to pay all the debts as currently structured.

The individual submits a repayment plan to the court. This plan must be approved by a bankruptcy court Trustee. The Trustee is also typically tasked with making payments under the plan, so the individual pays the Trustee. The Trustee’s office then pays various creditors.

Usually during a Chapter 13 you only pay off part of your debts. Priority and secured debts, such as taxes or auto loans, are paid in full. But unsecured, nonpriority debts, such as medical bills and credit card debt, are only partially paid. If you work through your Chapter 13 repayment plan successfully, the remaining debts are dismissed at the end of the repayment plan. That can take three to five years. 

Should You File for Bankruptcy?

Only you can decide if bankruptcy is the right choice for you. In most cases, you should consider all your other options and ensure there really is no way to feasibly pay your debts as you agreed. Consider the factors below to determine which type of bankruptcy might be right for you. Then, talk to an attorney to find out more about each option.

Should You File for Chapter 7 Bankruptcy?

  • What is your income? Not everyone qualifies for Chapter 7 bankruptcy. You have to pass what’s called a “means” test, and you usually don’t pass it if you make more than the median income of same-size households in your state. 
  • Have you filed for bankruptcy before? If it hasn’t been long enough since the last time, you may not be able to file.
  • What type of debt are you dealing with? Most, but not all, debt can be discharged in a Chapter 7 bankruptcy. If you’re trying to deal with debt that isn’t dischargeable, it may not be worth filing Chapter 7.
  • Do you want to keep your property? Some property may be exempt, such as your home or a car you need, but you may not be able to keep the same property in a Chapter 7 that you could keep in a Chapter 13, for example. Definitely talk to your bankruptcy lawyer about which property you want to keep and whether it’s possible.

Should You File for Chapter 13 Bankruptcy?

You’ll need to ask all the same questions you’d ask when considering Chapter 7 bankruptcy to find out if Chapter 13 is right for you. You also need to consider whether you have enough income to make some repayment toward your debt. In a Chapter 13 bankruptcy, you restructure your debts and pay some of them over 3 to 5 years before the rest are discharged.

You should also ask yourself if you have the discipline to make the monthly payments to the trustee and follow other rules set by the court. You typically can’t apply for most types of credit, including a mortgage, auto loan or significant personal loan, without getting the court’s approval if you’re in the middle of a Chapter 13 bankruptcy, for example.

Should You File for Chapter 11 Bankruptcy?

Do you have your own business and need to include business debts in your bankruptcy? You might want to consider a Chapter 11 over a Chapter 13. Chapter 11 may also be an option for individuals or couples who have too much debt to qualify for a Chapter 13. Otherwise, all the other questions above apply here, too.

The Main Differences Between the Types of Bankruptcy

To better understand the main differences between Chapter 7, 11, and 13 bankruptcy, consider the table below.

Chapter 7 Chapter 13 Chapter 11
Type of bankruptcy Liquidation Reorganization Reorganization
Income requirements Yes — can’t make above the median for same-size households within the state Yes — must have enough income to make the repayment plan viable Yes — must have enough income to make the repayment plan viable
Can individuals file? Yes Yes Yes
Can businesses file? No Only sole proprietors Yes
How long does it take? A few months 3 to 5 years 1.5 to 5 years
Debt limitations n/a Combined secured and unsecured debts must be less than $2,750,000 n/a

Who Can File for Each Type of Bankruptcy?

In addition to income and debt requirements, each type of bankruptcy has limitations on which individuals or entities can file. 

Chapter 7 Chapter 13 Chapter 11
– Individuals
– Married couples		 – Individuals
– Married couples
– Sole proprietors		 – Individuals
– Married couples
– Sole proprietors
– LLCs
– Partnerships
– Corporations

What Happens After You File for Bankruptcy

The first thing that happens when you file for bankruptcy is that the automatic stay goes into place. This is a protection that requires creditors to cease all collection efforts until the bankruptcy process can be completed. It’s a powerful protection. For example, even if you’re in the middle of a home foreclosure, the automatic stay can stop that process so you can work through bankruptcy to keep your home.

Once the petition is filed with the court, hearings are set and all creditors included in the bankruptcy are notified. They do have the option of responding to the bankruptcy if desired. You’ll also need to attend the first hearing in your case to testify, under oath, to the truth of everything documented in your petition.

If you’re filing a Chapter 11 or Chapter 13 bankruptcy, you’ll need to file a repayment plan, get approval for it and follow through on it. Once the bankruptcy process is completed successfully, your remaining debts can be discharged. 

How Does Bankruptcy Impact Your Credit?

Any type of bankruptcy can impact your credit. It’s a negative item that stays on your credit report and drop your credit score for up to 10 years, depending on which type of bankruptcy you file.

But the truth is that by the time most people get to bankruptcy, they’ve already missed numerous payments and may be in collections with one or more accounts. If this is the case, bankruptcy doesn’t usually drive your credit score much lower than it already is. And there’s a chance that you may see your credit score begin to climb again after bankruptcy as you make timely payments on debts and are better able to manage your finances.

Chapter 11, Chapter 7, or Chapter 13—these are all huge financial and legal decisions. Each comes with its own pros and cons, and it’s important to handle a bankruptcy correctly if you do decide this is the way you want to go. So, talk to a lawyer and get the information you need to make the best decision in your case.

  • Chapter 7 is removed 10 years after the date the petition was filed.
  • Chapter 13 is removed 7 years after the date the petition was filed.
  • Chapter 11 is removed 10 years after the date the petition was filed.

Want to keep an eye on your credit report to understand when negative items fall off it as you’re working to rebuild? Consider signing up for ExtraCredit.

Options Other Than Bankruptcy

Before considering bankruptcy, research other options to help manage your debt. You might find other avenues that are less complex and not as impactful to your credit reports. They can include:

  • Debt consolidation that reduces how many bills you deal with each month and may create a monthly payment situation that works better for your budget
  • Debt counseling that brings in professionals who can help you negotiate with your creditors for better terms and manage your money better to make ends meet
  • Selling property so you can pay off debts that are beyond your current budget
  • Increasing your income with a second job or side hustles so you have more money to pay your debts

Ultimately, whether bankruptcy is right for you is a decision you must make yourself. Start with the information above to gain a brief understanding of your options, and reach out to an attorney to help you understand how these details might apply to your case.

The Impact of COVID-19 on Bankruptcies

Bankruptcies are still proceeding in the wake of the coronavirus pandemic. You may find that hearings related to cases are being handled via phone or web conferencing and not in person.

If you’re making payments on a Chapter 11 or Chapter 13 case and have been impacted financially by the pandemic, you should contact your attorney as soon as possible. They can help you understand the best next steps, which might include filing motions in your case to alter your payments temporarily.

The CARES Act also provides some modifications to how certain elements of bankruptcies are handled. It ensures federal stimulus payments aren’t considered disposable income, for example, and provides Chapter 13 debtors a path to seek modified payment plans if their income is impacted. 

Source: credit.com

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A significant portion of the millennial generation now believes they will not have the opportunity to be a homeowner, indicating that mortgage originators may need to provide more education as part of their marketing.

Affordability remains the big hang-up, a Redfin survey found. But it’s not just millennials that are being impacted; besides the 18% of this cohort no longer thinks they will buy a house, 12% of the up-and-coming Gen Z, one already described as the largest and most diverse to enter the housing market, believe similarly.

First-time buyers already have a significant share of purchases this year, Zillow previously reported.

Breaking the list of affordability-related responses down further, high home prices, which have endured even as the U.S. economy has slowed, was the most cited reason why both groups felt this way.

A separate Redfin report issued on Thursday found that home prices gained 4.5% year-over-year for the four-week period ended Sept. 3.

As a result, the typical monthly mortgage payment of $2,612 is $18 below the all-time high set in May.

“If folks can figure out a way to buy instead of rent, they will,” Redfin agent Niko Voutsinas said in the home price release. “Some buyers are cutting back on other expenses to up their housing budgets because they believe home prices are only going to increase.”

Negative perceptions about their ability to save enough to make a down payment was cited by 46% of millennials and 33% of Gen Z. More than a third of both groups said mortgage rates are currently too high.

Meanwhile paying off student loan debt will take precedence for 21% of Gen Z and 16% of millennials over the purchase of a home, the survey found.

Of those survey participants that are planning to buy in the next 12 months, 36% of millennials and 41% of Gen Z members are working a second job in order to fund the down payment.

A cash gift from a family member is expected to help contribute to the down payment from 23% of millennials and 28% of Gen Zers.

Over 20% of both groups said they will tap into their investment portfolios by selling stock, while 15% will divest cryptocurrency.

“Many young people don’t have a choice between renting and buying,” said Daryl Fairweather, Redfin chief economist, in a press release. “They’re renting their home because even though rent payments have increased, too, it’s still more affordable than buying in much of the country–and renters don’t need a down payment.”

In turn, with private mortgage insurance, consumers can get a conforming loan with only 3% down. For first-time and other buyers, various forms of down payment assistance programs are available. Yet awareness of these alternatives has been lacking among the target audience.

“We’re very proud of the fact that we can enable people to buy a home with less than 20% down, we’ve been doing that for a long time,” Radian Group CEO Rick Thornberry said in an interview. “But it’s also something that we feel a strong corporate purpose to do, not just for the sake of volume, but to do it responsibly and sustainably from a borrower perspective.”

The Redfin survey was conducted in May and June; this portion of the study just concentrates on responses from 1,340 Gen Z and 1,973 millennial participants.

As of the end of the second quarter, it was cheaper for households to rent versus owning both on a nationwide basis and in 27 of the top 50 U.S. markets, a First American Financial analysis found.

But there’s no blanket answer to this challenge.

“Given current dynamics, more young households may choose to rent in the near term as the cost to own, excluding house price appreciation, has unequivocally increased,” a posting from First American Economist Ksenia Potapov said. “Yet, once you factor in house price appreciation, or depreciation in some markets, to the cost of homeownership, the decision to rent or buy will depend on local real estate market dynamics, which will determine if a home is likely to cost more or less in the near future.”

The conundrum about the housing market in general is recorded in Fannie Mae’s Home Purchase Sentiment Index for August, which at 66.9 is 0.1 higher than it was in July. Compared with August 2022, the HPSI was up 4.9 points.

“The overall HPSI is maintaining the low-level plateau set a few months back, and we don’t see much upside to the index in the near future, barring significant improvements to home affordability, which we also don’t expect,” Fannie Mae Chief Economist Doug Duncan said in a press release. “While renters are slightly more pessimistic than homeowners, for two years now a large majority of both groups have told us that it’s a bad time to buy a home, and they’ve continuously cited affordability concerns as the primary reason.”

Only 18% of those surveyed said August was a good month to buy a home, unchanged from July. But those that called it a good time to sell increased by two percentage points to 66%.

Ironically, the shares of respondents that believe rates will go up in the next year increased by 1 percentage point to 46%, while those that think they will move lower gained two percentage points to 18%.

That is because fewer respondents, 34% versus 38% in July, now think rates will remain unchanged.

Source: nationalmortgagenews.com

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Mortgage rates have hit a 20-year record high, but buyers are still eager to purchase homes in South Bend, Indiana.

“People want to buy a house even though the interest rates are up right now,” said Jan Lazzara, a real estate agent who has worked in St. Joseph County for more than two decades. “As long as we’re not overpriced, we’re seeing multiple offers.”

Although mortgage rates are slowing the home market across the country, buyers still face competition in South Bend due to limited inventory.

The South Bend-Mishawaka area placed ninth for best emerging housing markets, according to the Wall Street Journal and Realtor.com. The summer ratings indicate areas with appreciating home prices, a strong local economy and attractive lifestyle amenities.

Many cities which placed in the top of the rankings were affordable Midwestern cities. South Bend is no exception. According to Realtor.com, the median housing price in South Bend was about $188,000 in July 2023, compared with a national median housing price of more than $400,000 this year, as reported by the U.S. Census Bureau.

“Generally speaking, I expect home prices in South Bend to be lower than most of the country,” said John Stiver, a Notre Dame finance professor who teaches macroeconomics.

After a 11-year incline, housing prices in the U.S. began falling on an year-over-year basis this April. In South Bend-Mishawaka, prices are still increasing, though not as quickly as in 2022. Between the second quarter of 2023 and the second quarter of 2022, the South Bend-Mishawaka all-transactions housing price index increased 9.2%, the slowest year-over-year increase since the beginning of 2021, according to data from the U.S. Federal Housing Finance Agency and the St. Louis Federal Reserve.

“It looks like the rate of change of prices is going down,” Stiver said about South Bend-Mishawaka.

The average South Bend home value at the end of July was 4.6% higher than the same time last year, according to a Zillow report. The majority of homes in South Bend were sold for equal to or more than asking price in August, according to a Rocket Homes report.

“It’s been wonderful, one of my busiest years yet,” Lazarra said about the market. “The problem that we’re having is that there’s not a lot of inventory.”

Across the nation, housing inventory is down about 8%, according to data from the St. Louis Federal Reserve. In the South Bend-Mishawaka area, housing inventory decreased about 5% between August 2022 and August 2023. 

Due to record-high mortgage rates, many existing homeowners don’t want to put their homes on the market and give up low interest rates.

“People are afraid to list because they have a low interest rate,” Lazzara said.

But the high interest rates aren’t strangling buyer demand.

On a home she listed last week, Lazzarra received three overbid offers in less than a couple days. Another one of her listings received 27 offers.

She said a large portion of demand is from first-time home buyers looking for homes in the $150,000 to $300,000 price range. Many are moving to St. Joseph County for jobs at Notre Dame and the local hospitals. 

According to data from the U.S. Census Bureau, the population of South Bend and St. Joseph County remained relatively unchanged between April 2020 and July 2022.

Even though the local population is not increasing and the costs of borrowing are high, limited inventory is keeping prices high. For those who are moving, finding a home near South Bend is difficult.

Tim Travis, chief executive for a local medical foundation, closed on a home in Granger, Indiana in March 2023. Travis, his wife and three sons moved from Louisville, Kentucky because of a job promotion that came with a significant moving package.

“I couldn’t have moved up here and benefited from it for less than $100,000 probably,” Travis said. 

Although Travis traded a 3% mortgage rate for a rate of about 5%, he said the promotion justified the higher mortgage payments.

Still, “it would make a huge difference in my mortgage payment if rates came down,” he said. “I’d like to put those couple hundred dollars towards something else.”

Last spring, Travis had a hard time finding homes for sale, especially in his desired school districts. Travis moved to Indiana in November 2022 before his family joined up with him. He spent months looking for the right home.

“I was on it two to three days a week. It was like a second job, looking for housing,” he said. “It’s like going into a department store to look for clothes, and there’s no clothes.” 

When he finally found a 5-bedroom, 5,400 square foot home in a school district his family liked, he quickly put in a competitive offer just under $600,000.

Travis got the house. He also gained a deeper understanding of limited housing inventory in St. Joseph County.

“The interesting thing about it all is that the housing supply has gone down because people can’t move,” Travis said. “I wouldn’t want to be looking right now,” he said a few months after his March 2023 closing.

Tags: home market, housing inventory, local economy, Mishawaka, mortgage, mortgage rates, Realtor.com, South Bend, St. Joseph County, Zillow

Source: ndsmcobserver.com

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‘It’s a bloodbath’: the UK homeowners on variable rate mortgages

As the cost of borrowing rises again, we speak to some of the 1.4m people on variable rates dreading the effects

  • Full story: Bank warns rates will remain high for at least two years
  • Analysis: tough-talking Bank raises rates and a few eyebrows
  • Explainer: interest rate rise: what it means for you

“It’s a bloodbath, that’s the way I’d like to describe it,” says John*, a father of two struggling with the ever-increasing interest rate on his home loan.

He is one of the 1.4 million people in the UK on a variable rate residential mortgage, who have watched the monthly payments soar after the Bank of England raised the base rate to a 15-year high.

After a 50 basis point rise last month, policymakers lifted rates again on Thursday by 0.25 percentage points, to 5.25% – leaving homeowners such as John having to find hundreds more pounds to cover future bills.

The software engineer, who lives in Slough, Berkshire, says this could leave him with no choice but to get a second job to make ends meet. He is looking into zero-hours options such as delivering for Uber Eats, so he can still spend some time with his family.

He is the sole earner, with an annual salary of £80,000, which he says had been comfortable, but the pressure of rate rises and the increasing cost of food and energy bills have made it hard to make ends meet.

There are a number of reasons why a homeowner may be on a variable rate. They may not have wanted to lock in to a fixed deal when rates were high, believing interest rates would drop.

Roughly half of those on such mortgages are on a tracker or discounted rate deal, which are directly linked to the base rate, with the remaining 50% on a standard variable rate. SVRs rise at the lender’s discretion, and most will go up, though not necessarily by the full rise implemented by the Bank of England.

Rising UK interest rates force homebuyers to take on longer mortgagesRead more

“When I took the variable rate I had no option because at the time Liz Truss was in office and fixed rates were not attractive at all,” John says, speaking before the latest increase.

“I was originally paying £1,400 when I took out the variable rate mortgage. I received a letter a couple of weeks ago and my new payment is going to be £2,770 … another interest rate hike or two will mean I have to get a second job, this is how bad it is. It’s not like it’s just the mortgage, it’s the energy prices; it’s the food prices that are still high.

“If there weren’t these interest rate hikes I’d say I’m making a very comfortable living. Even with that salary I’m finding it hard to survive.”

He is now on a 5.89% rate after speaking to his lender about his financial worries and securing a 3.3% discount. “Every day I wake up and I check what the analysts are saying [about interest rates] because this is the centre of my world right now.”

Sophie Mohamed, 38, had planned to sell her flat to move to a bigger home after becoming pregnant in March 2021. However, she is unable to sell the property in Bethnal Green, east London, until cladding inspections have been completed.

The TV producer secured consent to let out the two-bed shared ownership property but was able to get only a variable deal after her fix ended, meaning her rate has soared from 1.68% to 6.68% – and will continue to go up in line with the Bank measure.

The £1,500 rent she charges her tenants no longer covers the £900 a month mortgage on her 35% share of the property and the £800 service fee and rent on the portion of the flat still owned by the housing association. “It’s doubled in the space of around six months,” she says.

“I’m not somebody who bought that flat to become a landlord and let it out, I’ve been forced to become a landlord. I have good tenants in that flat but the rent that they pay no longer covers that mortgage.

“It’s very difficult because I don’t want to lose those tenants, I don’t want to be a landlord, I’ve got good people in there and I don’t want to jeopardise that relationship but I have my own home to pay for as well.

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“Essentially, I will have to increase their rent but if I do I risk losing them and that puts me in a difficult position.

“We’ve also had a baby so we’ve got childcare costs on top of that. So we’re both working and although our salaries aren’t bad salaries, because of the increases that have happened it is definitely more of worry.”

Liz*, a journalist, relocated from London to Cardiff last year for work, and she and her partner have also been unable to sell their flat in the UK capital or rent out it, because it is a shared ownership property.

As rates increased, so did her mortgage payments – from £810 a month to £1,147 – as did the rent and service charge she pays to the co-owner, a housing association, which comes to £850.

The mother of two says she and her partner have used up £20,000 of their savings and have had to borrow from parents to make ends meet, as they must also cover the rent on their home in Wales.

“We knew we were going to move and so when our mortgage came to the end of its term in May last year, we didn’t renew on a fixed rate, which is how we ended up on a variable mortgage,” she says.

“We were on a 1.45% rate until 30 April and on 1 May we moved to a standard variable rate, which is 3.49% above the Bank of England rate which took us to 4.24%. Our payments went from £588.65 to £810.19. It was already quite a big jump, if only it had stopped there.

“According to the latest letter from the bank, we have a rate of 8.49% from the 1 August. It was 7.99% before, which was £1,147.26.”

She was waiting for Thursday’s announcement with “trepidation, because every little rise is reflected in much higher terms for us”.

“It has wiped out our savings because we are double paying [the mortgage and to rent a home], it has literally wiped them out over the last year, and unless we can sell, we are getting in a more and more difficult situation.”

*Name changed to protect anonymity

Topics

  • Mortgage rates
  • Property
  • Mortgages
  • Banks and building societies
  • Bank of England
  • Interest rates
  • Economics
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Source: theguardian.com

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A few months back, I noted that Millennials, those born between 1980 and 1995, purchased the most real estate between July 2012 and June 2013.

It sounded like good news, a positive trend that should bode well for the housing market on into the future. After all, these first-time buyers are critical to the ongoing health of the real estate market.

But there’s a problem. Nearly half of would-be Millennial home buyers today don’t have enough money saved up to purchase a home at today’s prices.

For that reason, nearly half plan to ask mom and dad for the required down payment money (and some will even ask their grandparents), according to a new survey from Trulia.

At the same time, 37% said they plan to work a second job in order to save the necessary cash, while 22% said they would turn to the state or federal government for help to achieve the American dream of homeownership.

Down Payments Are an Issue for All Ages

Either way, the message is clear – down payments continue to be an issue for prospective home buyers.

Last week, I pointed out that nearly half of recent home purchases required mortgage insurance, so it’s not just the young that are struggling with down payments.

Interestingly, Millennials aren’t even trying to buy McMansions, but rather modestly priced homes. In fact, 68% indicated that they were looking to buy a home under $200,000, which you think wouldn’t break the bank.

But that would still require a down payment of $40,000 to get down to the magic 80% LTV threshold, which would allow these home buyers to avoid private mortgage insurance and a higher mortgage rate.

But how can we expect young generations to set aside such a large chunk of money when there are so many other pressing costs, like monthly iPhone service plans and Starbucks.

Sure, I probably sound like a grumpy, no-fun Gen X’er, but upon seeing this top 10 list I lost hope in humanity.

Top 10 Expenses Millennials Would NEVER Give Up to Save for a Down Payment

1. Car
2. Smartphone
3. Cable TV
4. Netflix subscription
5. Vacation money
6. Eating out
7. Shopping for clothes
8. Organic food purchases
9. Gym membership
10. Morning latte/cappuccino

Don’t Worry, Trulia Is Giving Away Money

Luckily, Millennials, or should I say one Millennial (or someone of any age for that matter) won’t need to give up their favorite things because Trulia is giving away $50,000 via a new contest. Wells Fargo also has a contest going on now.

Don’t fret. If you aren’t the lucky winner, you can still get a mortgage with next to nothing down, which while extremely flexible, kind of sends the wrong message to the youth and the rest of America.

You don’t really need to save because there’s always going to be a home loan program out there that eliminates the need for a down payment. Heck, the FHA still only requires 3.5% down and the money can come in the form of a gift.

I’m not trying to get rid of no- and low-down payment options, because they obviously provide tremendous value to many responsible buyers nationwide, but I do wonder if it sets us up for yet another housing rollercoaster while disincentivizing the need to save.

A lack of home equity (and zero down financing) was clearly the problem during the last crisis, and we don’t seem to be addressing it much differently this time around.

Worse yet, today’s homeowner will know they can walk away from bad investments in the future with little recourse or consequence.

Source: thetruthaboutmortgage.com