Prevent Bankruptcy -
Alternatives to Chapter 13 Bankruptcy
If you want to
prevent filing personal bankruptcy, you have to have fair
amount of knowledge on this aspect. Bankruptcy is a federal
court process that helps individuals and businesses repay
their debts under the protection of the bankruptcy court or
wipe them out altogether. When you file for bankruptcy, an
automatic stay goes into effect that prohibits your
creditors from taking action to collect the debt without the
approval of the court. There are two basic types of
bankruptcies: liquidation or reorganization. The liquidation
bankruptcy refers to that chapter of the bankruptcy law
under which an individual or company allows his assets to be
sold off or liquidated to pay creditors. Reorganization is
most commonly known as Chapter 13 Bankruptcy.
In a liquidation bankruptcy, you turn your personal property
although with a few exceptions over to the court, which
sells it and uses the proceeds to pay your debts or a
portion of your debts. Creditors can no longer come after
you for payment, but the bankruptcy stays on your credit
history for 10 years and you may be denied credit during
that period. If you are behind in your mortgage payments,
you could lose your house in a liquidation bankruptcy. If
you made up your mind to prevent filing personal bankruptcy,
you have to be aware of serious consequences and should not
be entered into lightly. Having your debts erased doesn't
miraculously solve your long-term financial problems if you
have irresponsible spending habits.
Simply put, you can prevent filing personal bankruptcy by
practicing good money management. Here are some valuable
tips: try to avoid impulse spending, don't use a credit card
unless you have the cash to pay it off, tear up credit card
offers you receive in the mail, stick to a realistic budget,
don't buy more house than you can comfortably afford, make
sure you're adequately covered by insurance i.e. medical,
homeowners, auto insurance etc., don't make speculative or
high-risk investments and don't incur joint debt with others
who have questionable financial habits. Still, if you do
find yourself behind on your bills, call your creditors
before you get in too deep.
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