How to Avoid Bankruptcy

As we begin our life as adults, there are uncontrollable circumstances that may leave you no choice to file for bankruptcy. It is important to realize that certain situations may not be controlled like the loss of employment for more than six months due to the economy, lie threatening illness like cancer or sudden death of a loved one. Fortunately there are steps that you and others can take on how to avoid bankruptcy.

How to Avoid Bankruptcy

Bankruptcy Should Be the Last Resort

In the past few years the economy has paid a toll on everyone that has worked or is working. National reports have shown that there are high percentages that have accumulated too much debt. There is hope in finding other alternative in reducing your debt but you first need to understand what bankruptcy will do to your financial position now and in the future. Simply to put it another way is how to avoid bankruptcy all together. Bankruptcy is done by an individual and attorney that are qualified to file in the United States court system. There are two ways that the bankruptcy attorney can do this.

  • First file a complete bankruptcy which is Chapter 7 by the way will stay on your credit report for 10 years and will follow your financial records until you are dead.
  • Filing Chapter 11 and Chapter 12 are meant for individuals and businesses. However in the past five to 10 years there have been changes in bankruptcy laws. Seeking a lawyer that deals with filing bankruptcy should be contacted before you have decided to liquidate all your assets and property to escape of the accruing debt.
  • The second way to file is more common for people to use is Chapter 13. The Chapter 13 is filed as a payment plan to the creditors that you have debt with and last for the total of seven years.  Both of them will need to be done with an attorney that specializes in bankruptcy.

If you decide to do this, it is a lengthy process and an emotional time for all individuals involved. It is best to avoid this by other financial alternatives and some debt cannot be eradicated through these means.

Alternatives to Use and to Avoid Bankruptcy

There are organizations, attorneys, credit counselors and information on the internet that can help you on how to avoid bankruptcy.

Alternatives before Bankruptcy

  • Settlements for debt are legitimate and sometimes legal process when you cannot make the minimum balance payment. The creditors will place you into a reduce debt program which allows them to cut down the total debt anywhere from 40 % to as much as 70 % of the debt you owe them.
  • Negotiating with the creditors and communicating with them plays an important role in reducing your debt without filing for bankruptcy.
  • Consolidation for bills and loans can take place so that you can make one easy payment each month at a lower interest rate. On the condition that you still have good or excellent credit and income still be brought in reliably.
  • Although using quick loans to help pay off bills is the short term works eventually it will become another form of debt. This can be done by consolidating all the quick and pay day loans into an affordable monthly payment so that you can prevent going into bankruptcy.  Also it helps in managing and controlling your debt.
  • Financial planning and management is the solution to all debt reduction.  If you are unsure about what and how to manage your debt or finances this is the time to see a professional. A professional agency that focuses on each unique case with credit and debt reduction. They will show you how to avoid bankruptcy, help in reducing the interest rates by negotiating with the creditors and may reduce any fees along with penalties.
  • Mortgage restructuring or refinancing might be something that will need to take place so that you can make a lower mortgage payment and the money saved can be used on other debt. This is a sensible way to avoid bankruptcy and foreclosure of your house.
  • Give up things you think you need or want to have seems easy but if you have a spouse and/or children then it can seem complicated. Everyone needs to be included in cutting back to the basic necessities even if that means no new gaming system or just not going out to eat at McDonald’s.

If at any time you feel overwhelmed with the debt you have accumulated or just seem like you cannot make payments every month then a plan of action is needed now. A good plan with a logical and strict budget in place will give you an easier way of how to avoid bankruptcy in the first place.  Comparing the various results from researching and finding information about debt programs of how to avoid bankruptcy will help you find the right alternative to give you a sense of tranquility and a burden released.