Bankruptcy can have long term devastating effects on an individual, both personally and professionally. As a result it is seen as one of the most negatively life altering events, along with death of a loved one and divorce.
Bankruptcy should therefore be avoided if at all possible.
But, how to avoid bankruptcy?
Here are 5 steps that will help you save money and get you out of debts:
Step One
Pay all of your bills ON TIME.
Step Two
REDUCE the number of credit cards you carry.
Step Three
AVOID bankruptcies, tax liens (a lien for not paying state or federal income taxes or property taxes) and collections.
Step Four
REQUEST that your creditors reduce the credit limits on your accounts to lower your amount of available credit.
Step Five
Familiar yourself with Debt Management.
People need to consider the long-term negative effects bankruptcy has on one’s life before filing. Bankruptcy stays on your credit history for up to 10 years and stays on record at the courts for up to 20 years. Both of these facets lead to a diminished possibility of receiving a home loan within a certain period of time or being accepted for a certain job position because the application requires you to disclose if you’ve ever filed for bankruptcy. Most daily living expenses include this question on the application process, such as finding an apartment or home and signing rent agreements, leasing a car, obtaining security clearance for government positions and applications for employment of certain positions. Bankruptcy should always be reserved as the last option in relieving surmounting debt.
Individual Voluntary Arrangement – Good alternative to bankruptcy?
Unlike with bankruptcy, if you set up an Individual Voluntary Arrangement you:
Can keep your assets (including your home).
Can keep your financial affairs private.
Are not affected by professional disqualifications.
Can continue to run a company and act as a Company Director.
Do not have to inform your employer about your Individual Voluntary Arrangement.
Can hold public office
Individual Voluntary Arrangements are also a good alternative to bankruptcy from the creditors' perspective.
This is because creditors tend to get less money back with by filing a Bankruptcy Petition against a debtor than they do by accepting an Individual Voluntary Arrangement. This is because:
Court costs and professional fees of a bankruptcy are higher than an Individual Voluntary Arrangement.
The forced sale of a property or asset does not achieve its highest selling price.
There are less contributions to the fund.
As a result there has been a great increase in recent years of people applying for Individual Voluntary Arrangements as a way of avoiding bankruptcy.
And for the end, some bad things that can happen to you if you bankrupt (so don’t):
·The debtor will lose any realizable assets of value. Though they may not be sold until immediately and, perhaps, not even until after the bankrupt has been discharged.
·If the debtor owns equity in a home, this will almost certainly be sold.
·If a business is owned, this could be sold and any employees dismissed.
·Should the debtor live in rented accommodation and have rent arrears, this could put the home at risk if the landlord considers those arrears are unlikely to be paid. In this case he could commence possession action. Also, some tenancy agreements contain a clause stating that an undischarged bankrupt cannot be a tenant.
·Bank current accounts can be difficult to obtain, though there are some very basic accounts offered by a limited number of banks and building societies.
·Can ultimately be expensive. All fees for the insolvency service, courts and any trustee are taken out of the debtor's assets. There is a 15% levy on all sums received by the Official Receiver/trustee.
·If trying to obtain credit of more than £500 (including ordering goods and then not paying for them on delivery) the debtor must disclose his status as an undischarged bankrupt.
And so on. Bankruptcy is really one thing you want to avoid so don’t give up, try to find some solutions as hard as you can.
