Learn How To Avoid Bankruptcy
In 2006, there were nearly 2 million bankruptcy filings in the United States. With the economic tsunami in the past year, this number could possibly double as many more people consider bankruptcy to be a convenient and easy way out of the stress from their financial debt. However, many people fail to understand the full repercussions and never consider alternatives on how to avoid bankruptcy. For people who have overwhelming debt, bankruptcy might not be a viable solution. All they know is that they want the calls from the collection agency to cease. This is an immediate solution that does not consider the long-term adverse consequences related to a bankruptcy filing. There are various aspects which must be considered to understand how to avoid bankruptcy. The reason for bankruptcy is to allow consumers and businesses an opportunity to either eliminate or repay their debt under the protection of a federal court. The Federal Bankruptcy Code in Title 11 of the U.S. Code is divided into eight chapters: Chapter 1, Chapter 3, Chapter 5, Chapter 7, Chapter 9, Chapter 11, Chapter 12 and Chapter 13. The most common for consumers and the ones this article focuses on are Chapter 7 and Chapter 13. People who are struggling to remain in their homes may consider filing for bankruptcy in order to avoid foreclosure. A means testing is part of the process to determine eligibility for bankruptcy. The debtor must literally have sufficient means to repay the debt. In many cases, this is currently not possible because of the high interest rates and looming or realized unemployment. Rather that seeking a quick fix solution, consumers can learn how to avoid bankruptcy by positioning themselves through solid financial preparation. In other words, save some for a rainy day. Unfortunately, the current financial crisis has become a storm in many people's lives. There are many disadvantages to filing for bankruptcy. A person's credit history is ruined because the bankruptcy remains on their credit report for 10 years after it is discharged. This reduces the chances of getting future jobs and loans because creditors and employers use the report to determine a person's character. While bankruptcy may lead to immediate relief, a person can be hampered tremendously from future financial transactions. Bank account and credit cards are closed. A personal bankruptcy can negatively affect a business owner's ability to obtain business loans. Before making the final decision on this life-altering change, finding out how to avoid bankruptcy should be equally weighed. |
