Do Bankruptcy Laws Really Help

It is very important that you know about bankruptcy laws, if you are in debt. Certain legal provisions are very helpful in making a fresh start. You can opt for a repayment plan to pay off your creditors or you could liquidate some of your assets in order to clear dues.   

Bankruptcy laws can also be used by businesses to get their house in order. These laws are covered under Title 11 of the United States Code (the Bankruptcy code). The relevant chapters are chapter 7, chapter 11 and chapter 13.   

Why Avoid Bankruptcy

Legal recourse should be used as a last resort. Avoiding bankruptcy is a better option; prevention they say is better than the cure.
There are many reasons why you should avoid bankruptcy like a plague. It affects your credit score bringing it down by 200-250 points. Unfortunately, this negative entry stays for the next 7-10 years making it very difficult to qualify for new loans. Chapter 7 bankruptcy is bad news for your property too. Certain assets are not exempted under chapter 7 bankruptcy making them attachable property once bankruptcy is filed.

The scope of Chapter 7 bankruptcy is limited and it does not extend to all debts. Some debts like student loan, back taxes and other unpaid dues do not fall under the ambit of bankruptcy law. In such cases it is best to avoid bankruptcy.

Bankruptcy laws create a lien against your property. This gives your creditor a claim on your property. Chapter 7 bankruptcy affects your personal finances as well making it difficult to buy or rent a home/car.

It is very tough to get an approval for credit/loan after you have filed for bankruptcy. Even unsecured loans are hard to come by. Credit card loans are available but at a high cost. The interest rates on these loans are too high to make it financially viable. 
Retirement plans are also partially affected. 401 k plans are a nice place to park your investment up to a million dollars; anything above will be used for clearing debts.  

How To Avoid Bankruptcy

You can avoid bankruptcy by any of these plans:

• Debt settlement
• Debt management
• Debt consolidation  program
• Payday loan consolidation

Debt settlement reduces the amount due by as much as 40-60 %. However, you will need to negotiate with the creditors or the debt collecting agency. If you are not comfortable with the idea of dealing with your creditors, you can seek help of professionals.

Debt management is another method of clearing all dues. This is done by keeping all dues current. This gives savings in the form of interest charges. Interest charges often form a huge chunk of all dues and clearing dues become easier when it is waived off.

Consolidating all debts is another way of clearing dues. Payment is easier as the dues are cleared by monthly installments. The burden of interest charges is also reduced as there is one single amount to pay. This gives saving in transaction charges as well.

If you are struggling with several payday loans then you can consolidate them. This makes payment easy and also saves interest charges.
Being debt free is important because it gives you peace of mind and freedom from financial hassles. The best way to avoid bankruptcy is financial discipline; avoiding unnecessary expenses, keeping borrowing at a low, paying off debts in time and so on. A debt free today ensures a better tomorrow.