Avoid Bankruptcy and Secure Your Future

Facing Bankruptcy

If you face the possibility of bankruptcy you should first seek alternative solutions as soon as possible through either an individual voluntary arrangement or via a debt management plan. Bankruptcy carries a bad stigma and is a traumatic experience especially as it involves going public with your financial situation. But remember bankruptcy is just one option amongst many that you should consider if you cannot pay your debts.

Benefit and Implications of Bankruptcy

The benefit of taking bankruptcy proceedings allows you to start over again, subject to some restrictions. However, the implications of bankruptcy means that you will lose control of all your assets, cannot act as a company director, obtain credit over a certain limit without permission from the lender, your credit will be effected for many years and you face the possibility of being publicly examined in court.

Your Home

One of the most important factors in a bankruptcy concerns the family home. Unfortunately all personal assets are the responsibility of the Official Receiver or trustee and they have the right to sell your home as payment towards your debts. The time scale of the sale will depend on whether you have dependents living with you i.e. spouse and/or children; in some cases the sale can take place after the first year of bankruptcy. If your spouse, friend or a relative is able to buy your interest in your home it will stop the Official Receiver from selling it.

Alternatives to Bankruptcy

The alternatives to bankruptcy include an Individual Voluntary Arrangement (IVA) that is based on a formal and legal binding arrangement between the debtor and creditors, with regular payments being between three to five years. Trust Deeds and Debt Management Plans provide avenues to negotiate with creditors and reducing payments owed, generally performed by agencies on your behalf.

Reversing a Bankruptcy

You do have the option of reversing a bankruptcy and obtaining an annulment at any time if you can pay all bankruptcy fees, debts and creditors in full or to the satisfaction of the courts or if the bankruptcy order should not have been made in the first instance.

Essential Tips in Avoiding Bankruptcy Altogether

Your financial future depends on your cash flow, do not spend more than you can afford to. Make a list of all the essential items that you MUST pay for each month and look into ways to reduce any expenditure. Create your monthly budget and stick to it. If you want to spend more make more, supplement your income. Be creative, think about your interests, skills and seek ways to earn from them. Take a part time position or better still start your own part time business, you are only limited by your belief that you cannot do any more than you are already doing to make money.

If you find yourself spending more than you can afford, then you are most likely already living on credit. High interest rate debt is the one of the worst kinds of credit to be associated with, you will be paying high rates of interest and if you miss any monthly payments it will affect your future credit rating. Try and avoid this type of debt by spending within your means, reducing discretionary spending and/or by supplementing your income.

Remember too that you might fall ill, lose your job, so it is important to set some money aside and forget about it. Cash flow is to blame for any bankruptcy and not having full control of your current financial situation will impact your future.