Taking steps to avoid bankruptcy is vital if you want to maintain a good credit report. Bankruptcy is a federal court process and helps individuals and businesses repay their debts under the protection of the bankruptcy court. However, it should always be the last resort in dealing with money problems. Individuals and consumers can take steps to protect themselves from a bankruptcy. Here's why and how:
A Chapter 13 bankruptcy remains a blemish on your credit report for six years. If you are forced to file for Chapter 7 bankruptcy this will appear on your credit score for ten years. During this time you will not be granted any further credit or may be charged higher interest fees. Filing for bankruptcy will significantly impair your ability to get a home mortgage, car loan or student loan. So taking steps to avoid bankruptcy can ensure that you are financially secure in the future.
Under a Chapter 13 bankruptcy or “reorganization” plan your spending will be restricted and a certain amount will be deducted from your wages. It makes sense, therefore, to take steps to avoid bankruptcy. So how can you make sure that you take the right steps to avoid bankruptcy in the future?
The steps to avoid bankruptcy are based on learning and applying effective money management skills. Managing your money in a responsible way means controlling impulse buying. It also means controlling your credit card spending. Consumers should avoid using their credit cards unless they have the ready cash to repay the debt.
Take steps to avoid bankruptcy by controlling the number of cards you have. Throw out new credit card offers if you know you are already over your budget. If you don’t know how to draw up a monthly budget, learn how and then stick to your plan. What about other debts? In particular, your mortgage should be an amount you can easily afford and the same goes for your car.
Consumers can also take steps to avoid bankruptcy by ensuring adequate insurance coverage. This should include medical, homeowners and auto coverage to help protect your financial resources. You should avoid making high-risk investments or getting into joint-debt with unreliable partners.
If it looks as though bankruptcy is a possibility, take steps to avoid bankruptcy immediately. This includes calling ALL your creditors before your debts spiral out of control. Explain your situation and ask for a reduction in your monthly installments for a short period. You can also request a waiver of late payment fees or ask if you can be exempt from repayments for a few months. Once your money issues are under control you can make up the difference.
Many creditors are amenable to working with consumers to repay debts. If you are undergoing a temporary financial setback take steps to avoid bankruptcy now. Your creditors will be happy to get at least some of their money instead of undertaking costly legal action and time-consuming debt collection procedures. Consumers who have severe credit card debt problems can also make use of credit counseling services.
Credit counselors are professionals who will help you negotiate with creditors and work out a debt repayment plan. If you choose to make use of such a service find a reputable non-profit organization and avoid credit counseling scams. These will only make your money problems worse. The trick to proper money management lies in taking steps to avoid bankruptcy as soon as problems arise. So don't delay. Take steps to avoid bankruptcy now!
