Is Filing For Bankruptcy The Solution?

Bankruptcy may seem to be an easy solution for major financial problems. But it is always better to avoid filing bankruptcy at all cost and to turn to it only as a last resort.

Once you file for bankruptcy, this point will remain on your credit record for ten years. This will make it difficult for you to receive loans and credit. Some lenders may allow for limited credit with bankrupt; but only after extensive explanations, and at a higher interest rate and with added credit fees. Another reason for avoiding bankruptcy is that some types of bankruptcy call for repossession of assets. Once the bank finds that there is something with you that is not necessary for living, the item may be seized to pay for debts and bankruptcy expenses.

With bankruptcy, financial difficulty will not be solved and your life becomes an open book as the court pries into all aspects of life wherein you will have to provide all financial information like savings, investments and assets. Though bankruptcy may seem to suggest some freedom from financial debts, there may be other debts that will have to be paid like alimony, court judgment costs or child support.

So keeping these points in mind, it is always better to avoid bankruptcy. Debt consolidation is one of the best means of avoiding bankruptcy. These companies help you by examining your current loans and come up with a program that incorporates all these debts. The company handles the payment to all the creditors; you just have to make a single payment to them every month. They will also get you a lower rate of interest and a longer time period to repay the loans, thus making you save some money.

Easy access to credit cards and credit accounts at department stores has now made it rather easy to fall into debt. It is better to pay bills with cash, and not use credit when money runs low. So cancel the credit card account! If you fall in debt, instead of hiding from the debt companies, it is better to talk to them as they may be able to negotiate and help you solve your debt. It is always better to plan a budget calculating debt ratio to income when in debt. Just write all the bills and expenditure that you have. Then you can determine how much has to be paid for bills, and how much is left for other spending. If required, you can also sell your home and downsize to avoid bankruptcy.
The only benefits of filing for bankruptcy are that the stress of dealing with numerous creditors is relieved. Once bankruptcy is discharged, as most of the debts get written off, creditors cannot pursue them. However, the disadvantages to bankruptcy are many. Businesses can be sold and employees dismissed with bankruptcy. Equity in a home is most likely to be sold as with bankruptcy, reliable assets of value are lost.

Bankruptcy is a costly process where all the fees for courts and trustee are drawn from the debtor's assets. On filing for bankruptcy, it is not possible to hold certain public offices like MP, magistrate or even practice as an accountant or a solicitor. Moreover, with the new bankruptcy reform law, it is difficult to use Chapter 7 bankruptcy to get a new start in one's financial lives.

Under the old law, one could file for bankruptcy through Chapter 7 or 13. In Chapter 7, you can keep your exempt property like the equity in your home. Here most of the debts are discharged. However, in Chapter 13 bankruptcy, you have to agree to pay off all your debts over a period of three to five years. So according to the new bankruptcy law, most of the bankruptcies are forced to file for Chapter 13 bankruptcy.

Moreover, according to the new law, you have to meet with a credit counselor for six months before applying for bankruptcy. However, as there are insufficient credit counselors, it is rather hard to accomplish this. It is also required that you attend money management courses at your expense before discharging your debts. However, it is always better to approach a good bankruptcy lawyer before taking any steps!


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How To Build Up Your Credit

There are many effective ways to build credit. In order to keep creditors from bothering you, and in order for you to get a loan with a reasonable interest rate, you need to learn how to build your credit. The best place to start is to not buy things that you don't need. If you always make impulse buys, you will find yourself in deeper debt very quickly. And if you have no credit history at all, you must keep that in mind.

Building good credit if you have bad credit

If you have bad credit, consult one of the many books available written by qualified financial advisors in order to get started on the right path. You can find books like these at your local library. In these books you will find checklists and step-by-step advice that will help you turn your credit around. There are also guides available at the library that can instruct those in debt on how to write letters to their creditors. Letters are probably a more effective avenue to take rather than communicating by phone, since most creditors will not be sympathetic to your situation.

Another value of the written communication is that if you should end up in court, the written documentation will be easier to submit. Verbal commitments can be easily denied without written documentation. Any documentation that is relevant to your credit issues should be stored in a secured place. Make copies of any communication with credit agencies (both to and from you), and keep it under lock and key. If you notice any errors on your bills or credit, be sure to contact the correct agencies and dispute and resolve the charges right away.

If you have used your credit card to purchase an item or service and the item you bought was defective, you DO NOT have to make payment on the charges. You do need to dispute the charges with the service provider that sold you the product. If the proprietor does not exchange the item or reimburse you for it, you have the right to deny payment. Once you have disputed the charges with the proprietor it is then your responsibility to contact your credit card company to dispute the charge.
If you have bad credit and have a credit card, you can use the card to repay your other debts and then make monthly payments on the credit card. Ironically, you are getting out of debt while remaining in debt. In other words, if you use your credit cards to pay other debts, your debt on your credit card will continue to increase. Since credit cards charge significant interest rates, your debt will continue to increase unless you can make significant monthly payments.

No Credit, No problem?

If you think that you do not need credit at all, that is simply not the case.

In today's world, in order to make many major purchases, it is often a requirement that you have at least one major line of credit. Most lenders will not consider lending money or give credit to someone that has no established credit history. We are expected to establish a credit history when we are young, and if we do not lenders often wonder why, which makes you look like a high risk.

They have no way of knowing your payment record, or if you are able to pay off the debt at all. There are several reasons that lenders will refuse you a loan if you have not established a credit history. The best way to establish good credit is to have a credit card, make your monthly payments on time, and keep your spending under control. Good credit means managing your money each month and paying your bills on time.


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