What is bankruptcy, and how does it affect you?

The term bankruptcy literally means “broken bench”. In days gone by, when a debtor couldn’t pay his/her bills, they would break his/her workbench in two as a warning to other tradespeople and to punish the debtor.

Today, bankruptcy is a tool that can legally help your business to survive or allow you to discharge the debts of your business.

Are your business debts overwhelming you? Are you worried about how you’re going to pay your staff and bills next week? Are you seriously starting to think about bankruptcy as a possible solution to your woes? Well, before you take what is basically an irreversible step, be totally clear on what bankruptcy is and how it affects you for now as well as long term.

Bankruptcy is a way of dealing with the debts you cannot pay. It should only be looked at by you as the business owner in a situation where you have made every effort to keep your business floating and pay your creditors, but without success.

Only contemplate it when you believe that you cannot meet your ongoing financial liabilities and you are sure your financial position is unable to be salvaged. Becoming bankrupt is a very serious decision and you must only approach it as a last resort.

If your business is in danger of heading into problems that could lead to its demise, or your financial worries are such that it may lead to your business or personal bankruptcy, then seek urgent advice from an experienced lawyer and accountant as soon as possible.

Why?

Because there may be other options available to you that would avoid bankruptcy and help resolve your financial dilemma.

Bankruptcy may offer you relief from most of your debts but remember, you will be subject to many restrictions and limitations. As well you lose ownership of your property to a court official known as the Official Assignee.

Filing for bankruptcy is not the only way out of your precarious situation. If you can work out an arrangement with your creditors without having to go to court, then do so as you would be much better off. In court, your “dirty laundry” may become revealed for everyone to see and that can be embarrassing.

So what is the best way to AVOID bankruptcy?

Firstly, be clear on your financial situation? Are you insolvent? Insolvency means that what you owe (your liabilities) are more than what you own (your assets). That is, your money isn’t coming in fast enough to meet your bills when they fall due.

Secondly, investigate all other options.

Here are 9 alternatives to filing for Bankruptcy:

1. Sell off assets
   If you are getting financially strapped and starting to run into serious money problems then consider selling off assets you may have to clear your bills.

2. Reduce your costs
   If things are starting to look precarious, then be realistic. See what you can do to reduce all expenditure and get all non-essential costs out of the way. For example, if you have goods on hire purchase that you cannot afford, then let the goods be repossessed and stop the continuing payments

3. Budgeting.
   Budgeting means sitting down with an adviser, such as an accountant, and working out a plan to enable you to live and progressively pay off all debts. A good budget strictly adhered to, would soon pull you “out of the cart” if you are prepared.
   Hot Tip! Whether you are getting a car loan, mortgage loan or personal loan, one major factor that will get you qualified is your present income. Financial institutions who offer loans after bankruptcy are more concerned about your present finances than your past credit problems.
4. Refinancing.
   You may like to look at refinancing some assets and using the surplus cash to pay off creditors who can cause problems by lodging a creditor’s petition for bankruptcy if they are not happy.

5. Creditor’s pool.
   You can always try and arrange with your creditors to clear up their debts by instalment payments. Here you will need to see all your creditors and create a creditors pool, run by an accountant or solicitor. You will pay a certain amount of money into the pool and that money can be distributed to the creditors until their debts are paid.

6. Compromise.
   You can reach an agreement with your creditors on a proposition where their debts can be fully settled. There are a number of ways to agree on a compromise with creditors.

7. Instalment Order.
   This is an order made by a Court allowing you to pay back debts in easy stages without the threat of further legal action, while that order is in force. This is probably a good option, because it forces your creditors to accept the arrangement as long as someone the court appoints properly monitors it.
   Hot Tip! For car loans or mortgage loans after bankruptcy, another important consideration is the down payment. If you have enough funds to put down on a car or a house, then finding a lender will not be a problem at all.
8. Continue trading.
   If your business is temporarily insolvent then you should look at ways where it can still continue trading and hopefully generate good cash flow to meet your commitments. If you can, it is good to trade your way out of your financial difficulties. Most businesses can do this unless they are so far gone that recovery is impossible. For you to continue trading it is recommended that you talk to a professional adviser who can act as a guidance counsellor or coach, so you don’t get into deeper problems.

9. Bankruptcy.
   If you have tried all other actions and they have not been successful or agreed to by your creditors, then you should consider filing for voluntary bankruptcy in order to stop the deterioration of the situation.

If you can avoid bankruptcy in any way at all - do so.
If all else fails and it looks like you or your business is at the end of the road - talk to an accountant and lawyer immediately.

Best of luck.

Copyright 2005 StartRunGrow.com
http://www.startrungrow.com

StartRunGrow is a global online information organization that specializes in creating, developing and marketing business help information specifically with the aim of “making business easier” for entrepreneurs around the world. For many more free articles, success stories, forms & agreements and more, visit StartRunGrow.com

How do you know if you need to seek help from a credit counselor? There are so many things that can cause your finances to hit rock bottom. You can trim back on your spending and keep a close eye on your accounts. But like losing weight, many have the willpower to do it themselves, others need help.

When do you know you have to call in a financial expert? It can be at different times for different people. Here are fifteen situations that say you might need some help:

1. Your income is decreasing and your credit card balances are on the rise.

2. You can only pay the minimum amount, or less, due on each of your accounts.

3. You’ve learned to juggle your credit cards, using one account to pay for another.

4. You have more credit cards than pictures of your children or grandchildren.

5. You can’t charge any more.

6. You charge more each month than you can pay for.

7. You have to get a second job to pay your credit cards.

8. You can’t even estimate how much you owe. Why would you want to?

9. You are getting phone calls and letters from creditors.

10. You buy groceries and pay other bills with your cards.

11. You can’t get by without your cards. You have to have them to survive.

12. You consistently use your IRA or savings to catch up.

13. Your spouse doesn’t know what you are buying.

14. You sign up for every card offer you get.

15. You’ve lost your job and don’t know how you will pay the bills.

There’s no magic point at which you have to seek help. You, and only you, can decide if you have a credit problem. You may be able to help yourself.

If you start to notice that you make a trend of these situations, then take action. You don’t have to worry if you hide something from your spouse once or twice a year. But if you do it weekly, then you have a problem.

Only paying your minimum balance every once in a while is alright. But if it’s more than just once in a long while, you are letting your credit get out of hand.

The first thing you have to do is be honest. You can’t lie to yourself anymore and say it’s no big deal. It is a big deal. And it’s easier to accept help sooner than it is later.

If you chose to go to a credit counselor, be prepared. Take a year’s worth of your family’s personal finances. You need to be able to present how much you have saved, how much you owe, how much you make and so on. This is necessary for a proper assessment of how much trouble you are in and what kind of help is available.

Seek help before all the walls start to cave in. You don’t want one missed payment to happen. You want to get help before your credit history starts to be affected. Taking action now can save you a lot of time and money later.

Martin Lukac represents http://www.RateEmpire.com and http://www.1AmericanFinancial.com, a finance web-company specializing in real estate and mortgage rates. We specialize in daily updates, mortgage news, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies!

Low and even zero interest credit cards seem, at least on the surface, to be the solution to increasing personal debt problems. The providers give the user the facility of very low or even no interest on credit for a certain period of time. With these, one can transfer one’s accumulated unpaid debts from one card to another for anything from four months to fifteen months. No doubt, this is an attractive and even beneficial way to save money, and many users report complete satisfaction with their low/zero interest credit cards.

There is, of course, no such thing as a free lunch. Banks who give such a facility to their customers are not doing so for philanthropic reasons, and do manage to earn even out of such a seemingly user-friendly arrangement. As already stated, the reduced or nullified rate of interest on credit is for a limited period only, after which it can suddenly change to anything from 10% to 18%. Anyone who uses a low or zero interest card should be aware of the terms applicable after the specified period elapses.

The small print is understandably something that banks are not too eager to underline for increased prominence, and a creative corporate copywriter can conceal it so well in verbal razzle-dazzle that it is almost undetectable.

A small-print savvy and conscientious spender can doubtlessly benefit hugely from a low- or zero-interest credit card. However, it seems that such users of low or zero interest credit cards are more an exception than the rule. The rule is that a credit-card user tends to be seduced into a state of blissful complacency and reckless spending habits by the initial low/zero interest rate, and then has a rude awakening when that period is over.

Low Interest Credit Cards provides detailed information on Low Interest Credit Cards, Best Low Interest Credit Cards, Low Fixed Interest Credit Cards, Low Interest Credit Card Offers and more. Low Interest Credit Cards is affiliated with High School Student Credit Cards.

You are swimming in debt. You have 4 credit cards maxed out, a car loan, a consumer loan, and a house payment. Simply making the minimum payments is causing your distress and certainly not getting you out of debt. What should you do?

Some people feel that debt consolidation loans are the best option. A debt consolidation loans is one loan which pays off many other loans or lines of credit.

I’m sure you’ve seen the advertisements of smiling people who have chosen to take a consolidation loan. They seem to have had the weight of the world lifted off their shoulders. But are debt consolidation loans a good deal? Let’s explore the pros and cons of this type of debt solution.

Pros

1. One payment versus many payments: The average citizen of the USA pays 11 different creditors every month. Making one single payment is much easier than figuring out who should get paid how much and when. This makes managing your finances much easier.

2. Reduced interest rates: Since the most common type of debt consolidation loan is the home equity loan, also called a second mortgage, the interest rates will be lower than most consumer debt interest rates. Your mortgage is a secured debt. This means that they have something they can take from you if you do not make your payment. Credit cards are unsecured loans. They have nothing except your word and your history. Since this is the case, unsecured loans typically have higher interest rates.

3. Lower monthly payments: Since the interest rate is lower and because you have one payment vs many, the amount you have to pay per month is typically decreased significantly.

4. Only one creditor: With a consolidated loan, you only have one creditor to deal with. If there are any problems or issues, you will only have to make one call instead of several. Once again, this simply makes controlling your finances much easier.

5. Tax Breaks: Interest paid to a credit card is money down the drain. Interest paid to a mortgage can be used as a tax write-off.

Sounds great, doesn’t it? Before you run out and get a loan, let’s look at the other side of the picture - the cons.

Cons

1. Easy to get into further debt: With an easier load to bear and more money left over at the end of the month, it might be easy to start using your credit cards again or continuing spending habits that got you into such credit card debt in the first place.

2. Longer time to pay off: Most mortgages are the 10 to 30 year variety. This means that rather than spend a couple of years getting out of credit card debt, you will be spending the length of your mortgage getting out of debt.

3. Spend more over the long haul: Even though the interest rate is less, if you take the loan out over a 30 year period, you may end up spending more than you would have if you had kept each individual loan.

4. You can lose everything: Consolidation loans are secured loans. If you didn’t pay an unsecured credit card loan, it would give you a bad rating but your home would still be secure. If you do not pay a secured loan, they will take away whatever secured the loan. In most cases, this is your home.

As you can see, consolidated loans are not for everyone. Before you make a decision, you must realistically look at the pros and cons to determine if this is the right decision for you.

Wesley Atkins is the owner of http://www.credit-cards-advisor.com- which aims to get you fitted with the best credit cards to suit your situation. With numerous credit card articles and easy online credit card applications you will never choose the wrong credit card again.

With increasing competition, credit card companies have been trying to differentiate their products and come up with the best credit card deals. For consumers this often means competitive interest rates and a great variety to choose from when it comes to applying for a credit card. You can also get credit card deals from banks, department stores and even oil companies.

It is important to find the right credit card deal that is well suited to your credit needs. Each card offers a different combination of features and options such as APR, reward programs, personalization, online access to statements, etc. There are certain factors to keep in mind when researching credit card deals.

To get the right credit card it is important to compare credit card deals. Credit card companies often send out a lot of mail to entice people to sign up. Comparing credit card offers means looking at the variety of options available to you and not settling for the first attractive credit card brochure you get in the mail. One convenient way of comparing credit card deals is to research online.

An important part in choosing a credit card deal is to look at the APR offered. The APR or annual percentage rate states the rate at which interest will be charged on your credit card balance. The APR can vary greatly from one deal to the next.

Reward programs are another important consideration when it comes to selecting a credit card deal. Also it is important to acquire a credit card deal from a reputable and well know company or institution.

Credit card use has been on the rise for all age groups. Whether you are a student or a working professional, a credit card can provide you with many benefits. Students have to choose a credit card deal earlier and earlier in today’s world. Financial education and money management skills can help them select the best credit card deal for them and how to use credit wisely.

Find the right credit card deal can mean saving a lot of money over time and being able to reap benefits from its reward program. Also it takes you on your way to building a solid credit history report, which can be beneficial when you need to take out a loan in the future.

About The Author
Jakob Jelling is the founder of http://www.cashbazar.com. Visit his website for the latest on personal finance, debt elimination, budgeting, credit cards and real estate.