Wednesday 12 June 2013

Tips to Avoid Bankruptcy

Bankruptcy is a legal status that is attached to an individual who is unable to re-pay their unsecured debts. This can involve debts either being totally wiped out or alternatively paid off using the sale of the debtor’s assets as a source of funds. A bankruptcy can be initiated by either the debtor or one of their creditors but ultimately it has to be passed in a court of law.

The order will be attached to the bankrupt individual for a period of 12 months during which time the debtor will be unable to apply for further credit. All of the individual’s unsecured debts can be included within the bankruptcy but unfortunately secured debt cannot. The reason for this is that the secured debt can be paid off by freeing up the initial pledged asset to the creditor. Following this year long period, the individual will be discharged from the bankruptcy; however, the record of it will actually be visible on their credit file for up to 10 years more.

Because bankruptcy holds a shameful stigma within society many people try to avoid it as an outcome, preferring to continue to struggle financially. The fact that there is a risk that the bankruptcy details will be published in a newspaper also puts many people off going down this route. However, there are ways that a debtor can look to manage their debts without going bankrupt and without burying their head in the sand.

Tips to Avoid Bankruptcy

If you are struggling with debts and you feel that Bankruptcy is your only option, have a quick look at some of the tips to avoid this possibility below. Even making a few of the suggested changes could be enough to avoid you falling over the edge.


1. Cutting back on monthly expenses:

Could you live without cable TV whilst you are re-paying your debts or perhaps cut back on your daily trip to the coffee shop? By working out how your finances currently work for you, you may uncover some really great ways to save a bit of extra cash; alternatively you might discover that you are already doing as much as you can. The best way to ascertain what you have coming in and what you have going out every month is by carrying out and maintaining a regular budget plan. This information could be the cement in the brickwork in making the decision to either go ahead with bankruptcy or to get debt free one step at a time.

2. Debt Settlement:

If you have any older or non-current debts that have been passed over to collection agencies, then looking into debt settlement might be a good way to negotiate a lower re-payment. Debt settlement is a way to reduce your debt with a certain creditor by agreeing with them a reduced balance that will be accepted as payment in full in order for the debt to be written off. This is sometimes referred to as debt arbitration or as a full and final settlement.

3. Family and Friends:

Borrowing more money from creditors in order to consolidate debts can be risky especially if, as a result of a poor credit rating, you are subject to higher interest rates. Therefore, if you are able to borrow some money from family or friends, you may be able to pay off some of your arrears without actually getting further into debt. Understandably this can be daunting, particularly if you have chosen not to disclose your debt problems to anyone or alternatively if you have minimised the full extent of your monetary issues. However, if you are able to borrow some money on an informal basis you will not necessarily have to worry about a set re-payment date, nor will you need to be worried about dangerously mounting interest rates.

4. Speaking with the Creditors:

Often if you find that you are struggling with debt re-payments it can feel easier to bury your head in the sand and hope that your troubles will just go away, than actually tackling them head on. However, one of the most effective ways of dealing with your financial issues could be as simple as contacting your creditors directly, in order to discuss your situation. Lenders are aware that your personal circumstances can change and although ideally they would prefer you to continue meeting the arrangements in your credit agreement, they know that it is in both your best interests and their own that the debt is re-paid in full. Therefore, by getting in touch you can look to organise an alternative arrangement for the foreseeable future whilst you get yourself back on track. This will also highlight to the creditors that you are serious about re-paying what you owe.

5. Professional Help and Guidance:

If you feel that you really do not know where to start with regards to getting your head around your finances or even if you feel that you are unable to deal with your creditors directly – seek some professional help and guidance. There are lots of different organisations in the financial arena who specialise in helping individuals and families through tricky monetary situations. Whether you access a charitable group or a fee charging company, each will be tailored to assist you on a personal basis dependent upon your current circumstances. From acting as your advocate in respect of communicating with your creditors, to setting up and maintaining a Debt Management Plan – you can be sure that you will have the support you need to get yourself back on track.

  1. Hi Jhon Lee, You have a nice Info Post . I really love the thought when avoiding into bankruptcy.I also find that Safeguard your most valuable asset?your home. Filing for bankruptcy does not mean you have to lose your home. You might be able to keep your home, for instance, if you have two mortgages or if your home has lost its value. It can be worthwhile to understand the homestead exemption law to see if you qualify to keep living in your home under the financial threshold requirements.

  2. This post is a big help, It provide knowledge on when and how to file bankruptcy and better avoiding it. Keeping an assets will also depend on the process as the case run through.


favourite category

test section describtion

Whatsapp Button works on Mobile Device only