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Clear up these bankruptcy myths before filing

Filing for bankruptcy is a serious decision that will impact your personal and financial life in many ways. Not only does this hold true now, but in the future as well.

If you believe any bankruptcy myths to be true, there's a very good chance you could make a poor decision. Here are a handful of myths to clear up before filing:

  • You'll lose everything in bankruptcy. It's true that you may lose some of your assets, but it's not likely that you'll lose everything. With legal exemptions, you may be able to keep most or all of the assets you value.
  • A bankruptcy wipes clean all your debt. This would be nice, but it's not the way the process works. Some types of debts and obligations, such as student loans and child support, are not impacted by bankruptcy.
  • Bankruptcy will stop you from making future purchases. It's true that a bankruptcy filing will remain on your credit report for 7 to 10 years. For this reason, securing a loan is much more difficult. However, if you devote yourself to rebuilding your credit after bankruptcy, you can once again secure a loan at some point in the future.

Can childhood conflicts create drama when planning for parents?

It's a sad reality that many families disagree about the manner in which elderly parents' affairs are decided once the parents are no longer able to make decisions for themselves. What frequently is occurs is that childhood dramas and sibling rivalries affect the decision-making process — often to the detriment of the parents.

Ideally, all parents would draw up their own estate plans that address the care they plan to seek once physical or mental disabilities render them in need of hands-on assistance. This is not the case in many families, however.

Steps to creating your first estate plan

There will come a time when you decide to dive in and create your first estate plan. Even if you waited longer than you should have to do this, you're now faced with the process.

There are many steps that will put you on the right track to creating your first estate plan, including:

  • Deciding between a will and trust. There are pros and cons of both, so compare the finer details before making a decision. A will is typically easier to create, but a trust offers benefits like avoiding probate for your beneficiaries.
  • Choosing the right beneficiaries.: This is easy for some people, as they name a spouse and/or adult children. Others, however, need to think outside the box, especially those without any immediate family members or heirs.
  • Creating a durable power of attorney. If you're incapacitated and unable to make your own decisions, a durable power of attorney gives your agent the power to takeover management of your money and make health care decisions for you that are in your best interest.
  • Making a list of assets and debts. Without this, you could neglect to leave a particular asset to the specific person you intend. With a checklist in hand, this shouldn't be a concern.
  • Naming a guardian for your minor children. If you have children under the age of 18, you will need to name a guardian who will take over your parenting duties should you pass away.

Tips for helping a parent find a nursing home

When helping a parent find a nursing home, you're sure to face a variety of emotions. On one side, you know it's the right thing to do, so you're happy to help. Conversely, you may be upset that your parent is no longer able to care for him or herself.

There are many steps you can take to help your parent find the perfect nursing home or extended living center. Here are five things to consider:

  • Visit several facilities. The last thing you want to do is make a rash decision just because the first facility you visit appears to have everything your parent will need. Compare at least three nursing homes before making a final choice.
  • Talk with your parent about the move. They're likely to have some anxiety about moving to a nursing home, so you need to keep an open line of communication.
  • Talk to the staff. You don't want to focus solely on what you see on the surface. You need to talk to the staff to get a better idea of how they act, what they offer and what your parent can expect. Watch for red flags during these conversations.
  • Ask questions. This goes along with talking to the staff, but takes things a step further. The more questions you ask, the more you'll learn. Learning more about the options your parent has can make it easier to choose the right facility.
  • Learn more about the food and floor plan options. Every nursing home is slightly different in these areas, so you should dig into the finer details to learn more. Is the food high quality? Are there many options? Is there more than one room layout to choose from?

Do you know why you’re always overspending?

No matter how hard you try, there will be months when you overspend. You look at your budget and realize that you didn't do a good job staying on track.

While it's okay to make mistakes every now and again, it should be your goal to stay within your budget at all times. Doing so goes a long way in helping you avoid long-term financial trouble.

Situations that may point you toward bankruptcy

Most people understand the seriousness of filing for bankruptcy, which is why they take their time when making a final decision. While it's okay to consider all your options, you don't want to delay too long.

Here are a few situations that often lead to a bankruptcy filing:

  • Your debt continues to grow: No matter how hard you try, you keep digging yourself a deeper hole. If your debt continues to grow no matter what you do, it's time to consider the impact bankruptcy can have on your life.
  • You're using your retirement funds to get by: If you're desperate enough, there may come a point when you turn to your retirement accounts for money. It's your right to do so, but it will definitely impact your ability to retire in the future.
  • You're in jeopardy of losing your home: No one wants to lose their home to repossession but if you're not current on your mortgage, this could happen sooner than you think. Through a bankruptcy filing, you can stop your lender from proceeding with foreclosure, thus allowing you to save your home.

Get peace of mind with a health care power of attorney

Although you may be healthy today, it doesn't necessarily mean you'll always feel your best. There may come a point in the future when you require medical care. Furthermore, it's not out of the question that you could become incapacitated temporarily or permanently.

If you're unable to make medical decisions on your own, either because of a mental or physical incapacity, it's important to know that someone you trust will step in and make all the right decisions on your behalf.

Don’t forget to address these Chapter 13 bankruptcy questions

If you aren't eligible for Chapter 7 bankruptcy, there may come a point when you learn more about Chapter 13. While this is a different approach to improving your financial situation, there are a variety of benefits that can work in your favor if you go forward with a Chapter 13 filing.

The main thing to remember about Chapter 13 bankruptcy is that you are required to repay some of your debts through a repayment plan. This plan typically lasts for three to five years, so you must be committed over the long term.

Comparing wills and trusts

The public has a general understanding of both wills and trusts, but it is mostly gathered from the way that films and television shows talk about them, not from any personal experience with these legal tools.

While both wills and trusts are an essential part of most estate plans, they serve different purposes, and one generally cannot fill in as a substitute for the other. If you are beginning your estate planning journey, you need to understand the uses of these fundamental tools, since virtually all estate plans involve a will and many involve trusts.

Is every type of debt dischargeable under Chapter 7 bankruptcy?

As you begin to consider the pros and cons of Chapter 7 bankruptcy, you'll likely enjoy the fact that you can discharge some of your debts. Discharging a debt means that it is wiped clean, and you don't have to pay back those creditors in the future.

While this is the number one benefit of Chapter 7 bankruptcy, remember this: Not all types of debts are dischargeable. There are some that remain with you, even after your filing is complete:

  • Most types of tax debt, such as federal taxes owed from past tax years
  • Debts for obtaining money or assets through fraud or false financial statements
  • Child support
  • Alimony
  • Debts for some types of penalties and fines
  • Student loan debt
  • Debts you did not list on your Chapter 7 bankruptcy forms
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