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Avoid Bankruptcy

Most people can avoid bankruptcy by paying attention to their spending habits and expenses. However, when unexpected tragedies strike, such as death of a spouse, serious health problems or loss of employment, there might not be any options available to avoid bankruptcy. Anyone facing the decision of whether to file bankruptcy or attempt to dig out from under a mound of debt would benefit by enlisting help from professionals.

Credit counselors can oftentimes help people avoid bankruptcy. In some instances, credit counselors can negotiate with creditors and obtain lower payments and interest rates for debtors. Other times, debt consolidation is an option to avoid bankruptcy. Using debt consolidation, debtors are able to reorganize their debt and pay one monthly payment. Generally, debt consolidation extends the terms of the loan and the debtor is required to make payments toward their debts for an additional 12 to 18 months.

Individuals who choose to avoid bankruptcy should seek advice from non-profit credit counseling organizations. Reputable credit counselors offer free consultations and help people review their finances and create a workable budget. Credit counselors are trained to spot unnecessary expenses and teach people how to manage their money.

Many people make the mistake of using credit cards to pay for daily living expenses. Doing this can add up to several thousand dollars per year in interest fees and create unnecessary debt. Individuals who only pay the minimum monthly payment on credit cards are unknowingly cheating themselves out of money. Those in the habit of paying their credit card bill past the due date can rack up hundreds of dollars in late fees.

By taking time to review where money is being spent and arranging a workable budget can help most people avoid bankruptcy. There is nothing wrong with being frugal. In fact, it can become an addicting and fun game to see how much money you can save and how many unnecessary expenses can be eliminated.

As the cost of living continues to rise, it's crucial to become proactive in curtailing spending. Contact utility companies and inquire about their budget plan. Most gas, electric and water companies offer budget plans which allow you to pay the same amount each month. Enroll in bundle packages for telephone, Internet and cable services.

Reduce time spent on your cell phone or take advantage of plans which offer free nights and weekends. Eliminate magazine or book club subscriptions. Clip coupons or enroll in free coupon clubs via the Internet. Visit consignment or thrift shops for clothing, furniture and household goods.

If debt has escalated to the point of no return and there is no way to avoid bankruptcy, it might be time to contact a bankruptcy attorney. There are two types of personal bankruptcies - Chapter 7 and Chapter 13.

In Chapter 7 bankruptcy, individuals must liquidate their non-exempt property through a Bankruptcy Trustee. The trustee sells the property to pay outstanding debts due to creditors.

With Chapter 13 bankruptcy, individuals are allowed to retain their assets. A repayment plan must be approved through the Bankruptcy Court. If the debtor does not make payments according to the plan, it is known as failing out of bankruptcy. When this occurs, the Bankruptcy Court can dismiss the bankruptcy and order the debtor to liquidate their assets under Chapter 7.

Individuals facing the possibility of bankruptcy must realize there are solutions available. Although it's best to avoid bankruptcy, it's not the end of the world if there is no other option. Take time to seek advice from professionals or conduct research via the Internet to determine which path is best for you.