Avoid bankruptcy: things you have to know
There are more and more people nowadays who feel hopeless and consider their financial burdens so severe that they think their last resort and only “solution” is bankruptcy. By definition, bankruptcy is the legally declared inability of people to pay their lenders. But we can agree that bankruptcy might be a tool helping people who are in true need of protection. Nevertheless, it is a problem that more and more people file for it in the US, which will not have positive consequences. In 2008 the number of those Americans who filed for bankruptcy rose with 24% compared to 2007, and the statistics show an even worse situation for 2009 as more and more people use this option as an easy way out.
But why do so many people choose bankruptcy? There is a variety of reasons, the most common of which are:too high medical bills which account for more than 60% of the total bankruptcies credit card bills due to the high interests and hidden fees charged by credit cards, and because of the fact that people realize too late that they are in a severe debt job loss which is very common nowadays, due to the financial crisis
There might be other reasons as well, but these are the most common ones. And the situation is worse and worse as more and more Americans lose their jobs, the unemployment rate is higher and higher, and as a consequence, people cannot control their personal finances and do not have enough funds to arrange their lives financially. They may accrue thousands of dollars in medical bills or in loans, and the only thing they can do is file for “Chapter 7 – bankruptcy”. Many specialists argue that a careful financial planning might help people prevent this from happening, but this is not entirely true. If people do not have the necessary protection against a possible job loss or against unforeseen medical bills, bankruptcy might become unavoidable. It is not difficult for personal finances to get out of people’s control.
Filing for bankruptcy has the disadvantage that it remains on the applicant’s financial record forever. Moreover, going bankrupt is not pleasant at all; it is like admitting that you have failed financially. It would be like a stigma, and it can place on you quite a negative light. So it is of primary importance to know the dangers of bankruptcy and trying to do everything to avoid it!
One thing you can actually do if you want to avoid bankruptcy but you have financial difficulties is to contact your lenders or the businesses that are involved and are influenced by your inability to pay. Ask the people involved if there are any possibilities to change your payment scheme so as to make it easier for you to make the payments. For instance, they may lower the charged interest rates, or they can allow for you a longer repayment term. Usually companies are more than willing to assist you in repaying your financial dues by somehow reducing your financial burdens.
Other things people who are on the edge of getting bankrupt should or may do are the following. People may get professional advice. There are many financial advisors who can help you to put your personal finances on track. Another element people should focus on in order to avoid bankruptcy is learning from their own mistakes. They should think about the origin of their financial problems, and they should also analyze their spending habits carefully. If one figures out what his/her financial mistakes were in the past, they can work on preventing them in the future. This analysis may be based on one’s bank account or credit card statement. After one has found out what his/her mistakes were the next step is to plan the future purchases attentively, and then stick to this plan.
It is also important to fix your credit rating as well as try to pay your bills on time. Otherwise you will face late payment fees and high interest rates. But if you make regular payments each month, then you are protected against bankruptcy and other unpleasant surprises. Moreover, if you do not have enough money to pay the monthly premiums entirely, then pay as much as you can. Paying a small fee is always better than not paying anything towards your debt. This way you will surely reduce your loan principal and thus you will get out of debt for sure!
It is a good idea to arrange online automatic payments as this way you prevent being late with your payments. Another prevention-step would be paying with cash and not using credit cards until one is not completely debt-free. Also, those who have many debts and feel unable to repay them might apply for a debt consolidation loan instead of choosing bankruptcy. This loan pays off all of one’s debts, and the applicant only has to repay the new consolidation loan which generally has lower interests. So the new monthly payments are very likely to be lower than the amount one used to pay before.
Finally, it could be a solution to choose a Federal Government grant specially offered to low-income families. So those who earn less than $30,000 a year may apply for such a grant. There is a huge variety to choose from, such as mortgage payment assistance, small-business grants, consolidation, or grants for educational purposes. In order to qualify one must be at least 18 years old and American citizenship is also required. These grants provide applicants with up to 60% of their total debt amount and they do not damage people’s credit history. So before even thinking of bankruptcy, people should really take into consideration other alternatives.
Besides such grants, there are other bankruptcy alternatives as well. Some of these are: credit counseling, renegotiation with your creditor, or having a co-signer such as a relative. Finding a bankruptcy alternative is important not only to get a financial relief but also to eliminate stress related to one’s financial problems, especially if these problems would otherwise lead to bankruptcy. Most people who choose this ultimate solution are not even aware of its alternatives, they do not know the financial industry, and thus do not take various options into account which would definitely be better for them. So avoid going bankrupt by any means! If this financial world seems to be too complicated for you, find somebody who has a complete understanding of it and can help you in explaining what your options are. Also keep in mind that going bankrupt does not automatically mean that all of one’s debts are eliminated. It might happen that your debts will be restructured and you will still need to repay them.
So the best you can do if you are still thinking about bankruptcy is getting a bankruptcy-evaluation from a professional lawyer who knows both the federal and the state laws. This way you can find out if there is any possibility for you to avoid bankruptcy.
