avoiding bankruptcy

How To Avoid Insolvency

Personal insolvency is the umbrella term for any circumstance where an individual has insufficient money available to make their loan repayments as they fall due. It’s a precarious position to find oneself but has become increasingly common over recent years, with over 135,000 individual insolvencies in England and Wales during 2010 alone.
Insolvency is not the same as bankruptcy and although insolvency may lead to bankruptcy, there are usually alternatives available to those who find themselves insolvent. These include Administration Orders, Individual Voluntary Arrangements, and Debt Relief Orders.
If you’re facing insolvency it’s important to seek advice at the earliest opportunity and to pursue the most appropriate resolution before your creditors take the matter into their own hands and a solution is imposed upon you. Insolvency Practitioners are authorised to provide impartial advice on the courses of action available to you in relation to formal insolvency procedures.

How do people become insolvent?

Becoming insolvent ‘overnight’ is rare but not unheard of – household income might drop dramatically due to a lost job or reduced benefits, or an unusually large bill might stretch the budget to breaking point. But more often, insolvency creeps up over a much longer period with expenditure consistently exceeding income. In this scenario, the problem is frequently compounded by the borrower’s refusal to acknowledge their spiralling debt.

Five tips for avoiding insolvency

There are some simple steps you can take to protect yourself against the dangers of insolvency:

1. Know your figures – the first step to taking financial control is knowing how much money is coming in and how much is going out each month. Keep a close eye on how much money you are borrowing, particularly if your debts are spread across several lenders.

2. Budget accordingly – does your income exceed your expenditure? If not, take immediate action – look for opportunities to cut discretionary spending, or consider working extra hours.  If you can’t figure out how to balance your income and expenditure seek advice.

3. Anticipate financial obligations – you know that your energy bills will increase in the winter months, you know when the car’s MOT is due and you know that a family Christmas is expensive so don’t let these additional costs surprise you.

4. Put a little extra money aside – despite planning ahead, some financial hurdles may remain unforeseen. Having a rainy-day fund will help to cushion the blow.

5. Avoid taking further credit – paying due debts by taking further credit may be the only option to avoid insolvency but it will also increase your liability so should be considered a last resort. If you’re borrowing to repay debts then you’re already in a vulnerable position financially and should seek expert advice.

Avoid insolvency; act now!

If you are worried about the possibility of becoming insolvent or about debts in general, the single biggest danger is inaction. Confronting the situation early on will minimise the fallout and lead to a faster and less painful resolution.  There are a number of organisations that offer debt advice and can help you with your individual requirements.


Eliminating Your Debt in Most Convenient and Creditworthy Way

Eliminating Your Debt in Most Convenient and Creditworthy Way

Debt consolidation has always been beneficial over bankruptcy as far as creditor’s interest is concerned.  Whereas in Chapter 7 or Chapter 13 bankruptcy, creditors get nothing or very little from the debtor, the debt consolidation system shows positive and systematic money management in favor of them.

Debt consolidation beneficial for both:

Debt consolidation in turn could be extremely advantageous for consumers as the consolidation company would negotiate the reduced interest rate, lower monthly payment, reduced balance, cut off late fees and finally set up the time to be debt free. So in the long run the consumers can save large amount of money. Secured loans like car loans or mortgage loans don’t come under consolidation. Unsecured loans like bank credit cards, department store credit cards can be put into debt consolidation program.

Finally from creditor’s point view, dealing with debt Consolidation Company is beneficial. Here at least the consumer is showing an honest, strong effort to pay off the debt. And, by avoiding bankruptcy debtors can preserve their credit background.

Now for a consumer who is under severe debts pressure can look for either wiping out the debt in total or repaying it over a period of time. So which one to opt between both of the options – Bankruptcy filing or Debt consolidation? If it is the bankruptcy, it permits consumers to remove all of their debt and start fresh. If it is the debt consolidation you can make one payment to a debt consolidation company who in turn would combine your unsecured debts and disperse the funds for you.

Let us analyze which one looks smart and yet creditworthy?

Bankruptcy filings have many odds:

Initially from financial point of view bankruptcy may seem advantageous. But it is not that easy to file a bankruptcy and get relieved from massive dues with little effort. Even if it is Chapter 13 bankruptcy you won’t be complete debt free, it just extend the tenure of the repayment according to your convenience. Moreover Chapter 7 discharge doesn’t apply to the debts created after the bankruptcy filing or so. And, the most negative aspect is the destruction of consumer credit background. Consumer looses the creditworthiness which can pose many problems in future.

Usually after a bankruptcy, a creditor has difficulty establishing credit to the debtor for next seven years. Even if a creditor proposes to extend credit, the interest would be high and credit term would be less for the debtor. Thus from a consumer’s point of view also bankruptcy have several side ill-effects.


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