How To Avoid Bankruptcy

Avoiding bankruptcy has become a national priority, as hundreds of thousands of homeowners face losing their homes to high interest Adjustable Rate Mortgages (ARMs) and unemployment rates continue to soar. Bankruptcy is a legal, but last resort to resolve personal or business indebtedness. Filing a Chapter 7, Chapter 11, or Chapter 13 bankruptcy may seem like a quick fix, but these drastic measures can adversely impact future buying power. Because bankruptcies remain on an individual's credit file for ten years, many financial institutions may turn down future loan applications. Therefore, consumers facing financial crises need to discover how to avoid bankruptcy and consider feasible alternatives to resolving indebtedness.

Financial problems which threaten to end in monetary mayhem don't just happen overnight. Individuals and businesses usually accumulate outstanding debt over a long period of time. Careless consumer spending habits, lack of employment, or an unexpected illness can all be contributing factors. Unfortunately, in a society where excessive spending and extravagance are encouraged, many American consumers have become addicted to credit card abuse. And like a drug addict looking for the next fix, some consumers want what they want when they want it, without regard to cost or consequence. Jesus Christ explicitly taught His disciples to beware of covetousness, or the desire for possessions. (Luke 12:15) "And he said unto them, Take heed, and beware of covetousness: for a mans life consisteth not in the abundance of the things which he possesseth." Spending irresponsibly leads to an inability to meet monthly obligations, extensive late fees, and even more credit card abuse in an effort to alleviate increasing debt. If indebtedness and credit card spending are out of control; and the proverbial Peter is continually being robbed to pay Paul, it's time to take a serious look at how to avoid bankruptcy.

The first line of defense in avoiding bankruptcy is to exercise common sense budgeting and rigorously apply practical money management principles. Stop the credit card madness by destroying them and purchasing a prepaid card with enough money for emergencies, travel or unexpected expenses. Indebted consumers should also make a list of "needs" (life's necessities), versus "wants" (life's pleasures). Budgetary "needs" fall into four basic categories: food, clothing, shelter, and transportation. To save money on food, stop eating out and prepare meals and sack lunches at home for work and school. To cut clothing costs, shop thrift stores, flea markets and yard sales for good quality, slightly used items, especially for growing youngsters. All of these frugal measures should add a little extra cash to your monthly inflow.

Homeownership is still the American dream. But to avoid bankruptcy and keep the dream from turning into a nightmare, homeowners should refrain from buying more house than they have bucks. Purchasing a more budget-friendly home with less square footage and building a future addition, when the family finances are more stable, may be the best option. To save money and wear and tear on the family vehicle, carpool with coworkers and friends. And get rid of that gas guzzler! Trading down to a smaller compact or hybrid could save hundreds at the pump. Learn how to recognize the "budget-busters" and ward off the "wants." Decrease excessive monthly expenditures by cutting off the cable and renting movies and DVDs. Eliminate cell phone debt by purchasing prepaid phone cards and limiting calls to emergencies and travel only. Before spending money on unnecessary luxury items, consumers should ask themselves the following questions: (1) Can the item be borrowed or rented inexpensively without purchasing it? (2) Can the item be purchased later at a lesser price, perhaps on sale? (3) Will purchasing the item put a strain on funds already allocated for "needs"? (4) Does this item duplicate a similar item already in my possession? Answering these questions honestly will help consumers make good buying decisions and go a long way in avoiding bankruptcy.

The second line of defense in avoiding bankruptcy is to seek professional help: credit counseling agencies, banks, mortgage companies, and financial estate planners are all capable of helping consumers avoid bankruptcy and salvage their credit. A reliable credit counseling agency will assess the consumer's total debt and make arrangements on their behalf with creditors to pay off monies owed in smaller, manageable increments, or reduce the debt. Consumers with a combined debt of more than $10,000 can usually qualify for debt settlement. Creditors know that a workable alternative financial plan will eventually decrease the overall debt without ending in bankruptcy, in which case, monies owed may never be recovered. If indebtedness has already reached the point of no return, consumers can still avoid becoming bankrupt. When monthly payments begin to fall in arrears, contact creditors before they contact you! Mortgage companies and automobile lien holders will appreciate honesty and work with consumers to defer or re-structure payments placing current amounts due at the end of the contract, or reducing monthly notes to prevent foreclosures and repossessions.

Financial advisors may also propose debt consolidation to avoid bankruptcy. Banks and financial institutions offer consolidation loans to help consumers combine outstanding bills into one easily manageable monthly payment. Homeowners may qualify by using their home as collateral. Avoiding bankruptcy may also require homeowners to refinance their home and take a second mortgage to cover outstanding debts. Financially strapped homeowners should be careful not to borrow more money with a second mortgage than they can safely handle. Consumers seeking how to avoid bankruptcy may also find a ready source of income right under their noses. Real and personal property, valuable antiques, jewelry, and furnishings may be sold at auction or private sale to obtain additional financing to settle outstanding debts. When consumers find themselves sinking under financial hardship, common sense budgeting coupled with the help of qualified planners and advisors can be a lifeline to financial relief. Once consumers discover how to avoid bankruptcy and reduce indebtedness, exercising good monetary management and a little restraint promises hope for a brighter financial future.

How To Avoid Foreclosure

Can a person learn how to avoid foreclosure on a house? Is it possible to discover how to stop foreclosure once the process has begun? Better yet, can one prevent this from being an issue in the first place? Happily, in all three cases an affirmative answer is possible. Information is available to deal with many important financial aspects of home ownership. In matters relating to foreclosure, speed is essential, and can make the difference between success and failure, between keeping and losing that place called home.

Of course, it is better to never miss a mortgage payment. In fact, this should be avoided at nearly all costs. In an emergency, it may be possible to miss a payment or two on unsecured credit cards or utilities and still be able to remedy the situation fairly quickly. (However, even this practice is not recommended, since an increasing number of credit card agreements stipulate that if a customer misses a payment to any creditor, increased interest rates may be imposed on the account, even if a customer has never missed a payment with that card!) If a person misses a mortgage payment, however, this is an entirely different matter altogether. While the first situation is like feeling a strong tremor and going outside to investigate, the latter is like running from a full-blown volcanic eruption. There is literally no time for indecisiveness or procrastination if the goal is to learn how to avoid foreclosure.

Ideally, a person should have at least three months of expenses set aside in savings to provide a safety net in times of uncertainty. Even normally responsible people can be felled by a job loss or health problem, a death or natural disaster. What happens then? How can a regular person deal with an upcoming mortgage crisis and learn how to stop foreclosure? Rather than hiding ostrich-like from financial difficulties or giving in to depression, the matter must be faced head on and with courage. Thankfully, a Christian has this comfort from God's Word : "In the day of my trouble I will call upon thee: for thou wilt answer me." (Psalm 86:7)

If someone is experiencing difficulty in paying his or her mortgage payment, the last thing anyone should do is ignore the matter. The problem will not go away by itself. The only things that will go away by choosing to disregard phone calls, letters, or legal notices about the mortgage are your options. Despite the normal tendency to fear that if the true situation is made known to the mortgage company they will immediately begin foreclosure proceedings, the truth is that they do not really want the house as much as they want the payments on it. Also, businessmen realize that in the real world, people will sometimes experience financial difficulties for various reasons. Know that the mortgage company already has in place options on how to stop foreclosure from being the only solution to the problem. If such options are not pursued and the mortgage company does not hear from a customer, after a very short period of time they will conclude that foreclosure proceeding must be begun. At that point the choices of how to avoid foreclosure will be very limited.

Take stock of the situation. Are there any assets to be sold, or can a second job be obtained to meet expenses? Perhaps there are certain items like cable service, entertainment or a second car which the family will have to give up for awhile. Also try to determine if the financial setback is temporary or if another long term solution will be needed. If the difficulty is of a temporary nature, it may be possible to arrange with the mortgage company a way to repay the overdue funds over a period of time, or to 'skip' a payment by having them add the funds back on to the principal, thus extending a little breathing room. Some companies have special policies for dealing with customers who have been affected by natural disasters or whose financial problems arise from the fact that they have been involved in a military deployment.

If a person is seeking how to avoid foreclosure, there may be the temptation to pay off smaller bills to lessen the number of creditors being dealt with at one time. This may make the individual feel better, but is actually not the best strategy. It would usually be better to lose the credit card than to lose the house. If one is trying to figure out how to stop foreclosure on the house, these funds may be needed to accomplish that purpose. Even if a customer can not repay the entire mortgage payment, a token payment will at least indicate the intention to repay the debt, and the payment may be just enough to keep the mortgage company from beginning foreclosure proceedings.

Do not fall victim to foreclosure scams. The money spent on such schemes is better spent by putting these funds towards the mortgage payment. An individual should never sign any legal document with such firms before checking with an attorney to be sure that the house is not being signed away. Even if a company is legitimate, any information they might be able to give you about how to stop foreclosure or the options available in your particular case can be found for free by contacting the state's Housing Office. The U.S. Department of Housing and Urban Development (HUD) makes available free or low cost counseling about how to avoid foreclosure, and will help to organize finances or even represent a customer in negotiations with the lender.





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