How To Avoid Bankruptcy

For you to know how to avoid bankruptcy you need to understand what it is. It is basically a court decision that seeks to help people and businesses to find a way to repay their debt; this can be done through either Chapter 13 or Chapter 7 Bankruptcy. Once you file for bankruptcy it means all your creditors will be prohibited from taking any legal or civil action against you. In the United States for example you will find two types of bankruptcy; reorganization and liquidation. Liquidation is also known as Chapter 7 and with this type, the law will have your assets converted into liquid and the money will be used to pay creditors. Reorganization bankruptcy is also known as Chapter 13.

How to avoid bankruptcy

The best way to avoid bankruptcy is through proper management of your finances. Things like impulse spending habits must bee avoided by all means possible. Some good financial management tips that you may need to practice are;

- Avoid using your credit card unless you have got some money to pay for it

- Ignore credit offers that come in your ordinary mail or in your email box. These can be very tempting so you want to make sure that you avoid them by as much as possible.

- You must always write up a monthly budget before you receive your income. This will help you to manage your finances wisely.

- Do not buy things, even property that is more than what you can realistically afford.

- You must have adequate insurance cover for all your assets, ranging from your personal jewellery to your house.

- Don’t get into debt with a partner, be it a spouse or business partner, if you do not trust their financial habits. Even if you are careful about your spending habits such people may leave you in big financial trouble.

- By all means possible you must avoid risky investments because you can lose all your money. This includes activities like gambling for money or property.

-  

Negotiate with creditors

If you find out that you are not able to pay off some of your debt on time or you are about to miss an installment you need to get in touch with your creditor. Explain to them the situation you are in, for example if you lose your job or you become ill you may fail to pay your bills. You can negotiate with the creditor for a temporary reduction in your installment or request for a waiver of penalties. You can also use the services of a credit councilor and they will be able to negotiate with your creditors on your behalf. Whenever you use a credit councilor make sure they are reputable and legitimate, otherwise you may waste your money

Comments

Most Recent Articles