Money Management

Small business bankruptcy proceedings happen in steps. Learn what happens after filing, including fees and requirements. 

It’s happening. The balance sheet is coming up red, and there’s no shoving it back into the filing cabinet. Things are looking grim. You consulted with stakeholders and a qualified bankruptcy attorney, and together, you decided your small business would file for bankruptcy.

Though bankruptcy numbers fell post-pandemic, they’ve climbed back up again. Year over year, bankruptcies have risen by 18%, according to the American Bankruptcy Institute (ABI) and Epiq Bankruptcy. Fed rate hikes may be partly responsible (debt has become costlier).

Declaring bankruptcy is no small thing. There are two major types of bankruptcy: Chapter 7 and Chapter 11. Here’s what happens when your small business files for bankruptcy.

Chapter 7

Small business owners who see no path to profitability may file for Chapter 7 bankruptcy, which liquidates (shuts down) the business completely to settle debt.

Once you decide to move forward with Chapter 7, you may be required to undergo a means test comparing income and expenses. Individual proprietors (not corporations) may need credit counseling 180 days before filing.

Once that’s handled, you can petition the bankruptcy courts.

What happens after you file

Debtors can no longer contact you to collect debt.A court-appointed trustee takes control of your assets and sells them to settle debt.Remaining debt is discharged, meaning you’re no longer on the hook.

After your debt is discharged, your business shuts down, and the court case ends. The bankruptcy is effectively over and done. You must deal with the consequences of filing for bankruptcy, but most, if not all, debt is settled (there are exceptions).

Chapter 11

Small business owners who see a potential path to profitability may file for Chapter 11 bankruptcy, which reorganizes debt to make it payable.

Once you decide to move forward with Chapter 11, you may be required to undergo credit counseling. You’ll want the accounting books handy, because the courts will require detailed financial records of your business operations.

Once you’re ready to file, you can do so in bankruptcy courts.

What happens after you file

Debtors can no longer contact you to collect debt.You must develop and submit a plan for profitability.Creditors and courts must approve your plan.You must follow through and make progress reports.

Once your plan is successful, your small business can shed its bankrupt status, and the case is closed. Ideally, your business is healthy and better-organized post-restructure. You will likely have paid thousands in fees to get to this point.

How much does it cost?

It depends on a few factors, including your hired attorney, the complexity of your case, and the type of bankruptcy you’re filing. For reference, debt.org provides a few total cost estimates:

Chapter 7 bankruptcy is estimated to cost $1,788, most of which is attorney fees. It’s typically the cheapest form of bankruptcy filing because the business doesn’t need to be reorganized.Chapter 11 bankruptcy is estimated to cost $19,738, the vast majority of that going to attorney fees. Should you need an accountant to organize your finances, prices could go way up.

Alternatives to declaring bankruptcy

Bankruptcy has clear perks — no more debt! — but it can be lengthy, expensive, and complicated. Not always, but often. Before filing, small business owners may want to exhaust other options.

Debt settlement is an option. You can negotiate down debt with debtors if you can convince them you’re unable to pay their loans as planned. They may prefer to lighten your load if the alternative is getting paid nothing at all.

A debt consolidation loan is another option. You can consolidate your debt so it’s easier to pay. For example, you could combine two $10,000 loans with interest rates of 10% into a single $20,000 loan with an 8% rate, shrinking your total interest payments.

Definitely consider consulting a bankruptcy attorney before filing. It’ll cost you to hire one, but it may be worth the payment to settle debt or save your business from going under. Speak to an attorney to ensure bankruptcy has minimal impact on your credit score.

>> More: What happens when individuals file for bankruptcy?

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Some budgeting apps use CIA-level technology to keep your information safe. Find out how you can use apps to simplify your finances without putting your info at risk. 

Budgeting apps can be fantastic tools that make it easier to manage your money. Gone are the days when you needed to sit down with a pen and paper and pore over your financial statements to understand your financial situation. Instead, you can connect an app to your bank account and you’ll have the start of a budget in a matter of minutes.

That said, you’ve got to wonder how safe those apps are. I mean, it’s one thing to trust online banking (and even that carries risks). It’s quite another to allow an app you downloaded from the internet to access your financial information. The good news is that many top budgeting apps use banking-level security to protect your data. But in these days of data hacks and security breaches, it’s still worth being careful.

What are the risks of using budgeting apps?

The two biggest security risks of using a budgeting app are that the company behind the app gets hacked, or that your device is compromised at a user level. At an app level, look for apps with good reputations and read their security policy carefully. If the app is transparent about what data they keep, why they keep it, and how they safeguard it, that’s a pretty good start.

It’s also good to look for apps that allow user-level protection such as PINs, multi-factor authentication, or passwords. We’ll cover more actions you can take at a user level to protect yourself further on.

Here’s what some popular apps say they do to keep your data safe:

You Need a Budget: At a user level, access to the app is password protected. YNAB says it uses the same technology as the CIA to protect your data. It also has strict policies about access to user data and makes a strong commitment to delete your information if you close your account.Mint: Mint says it uses multi-layered hardware and software encryption and only stores the bare minimum of user information required to provide its services. In addition to password protection, at a user level, it also verifies your account periodically via text message or email.Goodbudget: Goodbudget doesn’t need the same level of security as other apps because it doesn’t connect to your bank account. Nonetheless, it says its data center is protected by bank-grade security. At a user level, the app lets users set a password.PocketGuard: The popular money management app says it uses the same level of security as your banking app. It doesn’t store any credit/debit card account credentials. At a use level, it requires a PIN and password combination.

How to protect your online information

You can pick the most secure banking app or budgeting app in the world and it won’t make any difference if criminals are able to access your phone or computer. I think of it like the Great Wall of China — a huge, 13,000-mile-long wall that ran the length of the country. But it still got breached. Genghis Khan didn’t need to break through the wall when he could bribe or extort the soldiers guarding it.

Unfortunately, cybercriminals are experts in getting your confidential data. Here are some ways you can make it harder for them:

Use unique and hard-to-guess passwords for every app: As someone who used to use the same few passwords for everything, I speak from experience here. If the company you use to buy vegetables online gets hacked, your password will be out there. It means criminals could gain access to all your accounts. Find a system that works for you to create individual passwords for every account, such as a password manager.Set up multi-factor authentication: Multi-factor authentication goes above and beyond passwords — you’ll also need to provide extra information such as a fingerprint and a code from an authentication app when you log in.Don’t open budgeting apps or online banking on public wifi: Public wifi networks can put your information at risk. Be careful about what apps you open if you’re not on a secure connection.Watch out for phishers: Phishing is an increasingly common threat in which criminals pose as companies or financial organizations you trust, such as your bank, to get hold of your information. Be wary if you get an unusual message from your budgeting app asking you to click on a link or share your login credentials. Check the sender’s address and any URLs carefully. Red flags? The domain name might be slightly misspelled or the language may not sound quite right.

Bottom line

There are several ways that budgeting apps can make it easier to manage your money, including setting up a budget, scheduling payments, and setting savings goals. If you’re worried about security, it’s reassuring to know that most top budgeting apps have high-grade data protection and encryption systems to protect your information.

That said, whether it’s a budgeting or banking app, some of your online security depends on you. If you use any kind of app to manage your money, use strong passwords and only log on from secure networks. That way you can make the most of the convenience of apps without putting your money at risk.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Mortgage prices have skyrocketed over the past few years. Read on to find out what mortgage terms online users are most interested in. 

House prices have skyrocketed nearly 29% over the past three years, according to the Federal Reserve Bank of St. Louis. That rapid rise has left potential home buyers desperately wondering when housing costs will cool down. And to help them find the answers, many of them are unsurprisingly searching Google for the answers.

A quick look at the most popular mortgage loan topics on Google over the past three months shows that potential home buyers are interested in figuring out how to calculate a mortgage payment, what loans are available, and what the current mortgage rates are.

If you’re looking to apply for a mortgage loan soon, or you’re just curious about what online users are searching for, let’s take a closer look at the top mortgage loan terms on Google right now.

1. Mortgage calculator

According to Google, the top mortgage term searched by online users was for a mortgage calculator. These calculators are great at helping buyers figure out how much their monthly mortgage payment will be based on specifics like the price of the home, the interest rate, and the down payment.

Using a calculator can help you compare different loan scenarios, which is helpful before you contact a mortgage lender so you have an idea of how much a hypothetical loan will cost.

The Ascent has a great mortgage calculator if you need one, which allows you to include home insurance, property taxes, and homeowners association fees to better estimate your monthly housing costs.

2. Mortgage loan

The next term Google users searched for under the mortgage loan theme was the general mortgage loan topic. A mortgage is a type of loan you take out when buying a house, which is secured by the home you’re buying.

Most mortgage loans are either for 15 years or 30 years, and there are a handful of different types of mortgages, including a conventional loan, an FHA (Federal Housing Administration) loan, a U.S. Department of Agriculture (USDA) loan, and a Veterans Administration (VA) loan.

Most loans, around 70%, fall into the conventional loan category, meaning any federal mortgage assistance does not back them. Each type of loan has benefits and drawbacks, so it may be helpful to find out which kind of loan suits you best by reading our beginner’s guide to mortgages.

3. Mortgage payment

Google users really wanted to know about mortgage payments as well. Your monthly mortgage payment will be based on the principal amount of your loan, how long your mortgage term is, what your interest rate is, and other fees, including your HOA fees and your homeowners insurance premiums.

For example, if you buy a home for $350,000 with a 20% down payment and a 7% interest rate, then your monthly payment for principal and interest would be $1,862. But you’ll likely pay more than this because most people also roll their property taxes, homeowners insurance, and HOA fees into the payment.

It’s also good to keep in mind that at the very beginning of your loan, more of your payment will go to the interest owed than the principal amount. As you continue making payments, you’ll eventually pay more towards your principal than the interest. This payment schedule, known as an amortization schedule, will be provided by your lender when you get a mortgage.

4. Mortgage interest rate

Finally, one of the most-Googled mortgage terms was for interest rates. The mortgage rate determines the interest you pay to your lender, and they’ve been on the rise over the past few years, making housing more expensive.

Mortgage rates have skyrocketed over the past several years as the Federal Reserve has pushed the federal funds rate higher to fight inflation. The average interest rate for a 30-year mortgage rate was just 3% three years ago and now it’s 6.75%. To show you how much a few percentage points matter, consider that a $350,000 home, with 20% down, would cost $635 more each month with a 6.75% interest rate compared to a 3% rate.

While you can’t change a bank’s lending rates, there are a couple of things you can do to improve your chances of getting a better rate.

First, keep your debt-to-income ratio low. Lenders typically want to see your monthly total debt payments be below 35% of your income, according to Wells Fargo. Paying your debts down will not only lower your debt-to-income, but it could also help raise your credit score, which could improve your interest rate.

Second, shop around for the best lender. Just as online users are researching mortgage terms right now, make sure to do your own research to find the best mortgage lender for you, especially if it’s your first time buying a house.

One lender may offer you a better rate or even lower fees, and some may even offer free refinancing in the future if rates drop. Comparing lenders can help save you money, so spending some time researching upfront could save you money over the long term.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.

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