Bankruptcy, Debt Relief and the National Personal Insolvency Index
Going all the way back to August of 1928, the National Personal Insolvency Index contains bankruptcy data, debt agreement filings, and other sensitive entries. All of the documents involved in this process are available for perusal for the nominal fee of $20. This may have serious adverse effects on your opportunity to find work, obtain future credit, and even find proper housing.

Bankruptcy Does Not Always End After Three Years
Trustee supervised debt settlements are supposed to be finished within a three year time period. After that time, your bankruptcy is considered discharged. Unfortunately, there is a possibility that your trustee will object to discharging you, especially if there are unresolved issues with your fiscal documents. Moreover, even if you are discharged after three years, there are still ancillary paperwork filings and associated obligations that require you to cooperate with the trustee.

Personal Restrictions
Perhaps the greatest disadvantage are the personal restrictions you are sure to experience during the three year period — and well beyond that time frame. For starters, your borrowing power is greatly curtailed. Company management is no longer possible for you, unless you have written permission from the bankruptcy court (which is not guaranteed).

Business relationships may be severely tainted by your obligation to disclose to business associates and vendors that you are now bankrupt. Moreover, you will face a number of stern overseas travel restrictions; by and large, you must petition the court and be granted permission to leave the country while undischarged bankrupt.

In addition to the foregoing, if your position terminates at your place of employment, and if you are offered a termination pay package, these funds may be claimed in part or in whole by the trustee for distribution to your creditors. This puts you into a precarious fiscal position of making payments for daily living expenses while you are searching for a new job.

On the Upside: You Lose Your Debt
Of course, this process is not only a collection of disadvantages. Instead, the main advantage is that you will lose your debts and have a trustee work with your creditors to come to an equitable settlement. Your unsecured creditors will have no claims on you. As a matter of fact, as soon as you officially file, you are under the protection of the Bankruptcy Act, and you may no longer be harassed by a credit collector.

Avoiding Bankruptcy: Differentiating Good Debt from Bad Debt
It is impossible to avoid some debt, but did you know that there are debts which should be avoided? For example, a car loan or a home loan is a good debt because each is tied to an asset. Conversely, a credit card debt is a bad debt simply because the item it paid for is most likely already consumed, while the payments continue. The first step to managing loans, credit cards and bills is to separate those which are for bad debts and then work hard to pay them off quickly.

Stay in Control
Bankruptcy is frequently the final act in a desperate debtor’s fiscal profile and hearkens back to a time of losing control. Debt is something that requires careful and consistent management. Ignoring debt, avoiding dealing with debt, and letting debt get out of control leads to bankruptcy; by failing to stay in control, late fees and surcharges are added to principal balances and more often than not make payments go so high that they are no longer affordable.

How to Manage Loans and Other Financial Products
Until you are certain that you have a firm grip on your credit, do not use it anymore. Leave credit cards at home and do not use them on the Internet. Go to a cash only form of accounting and either pay in cash for your purchases or make other payment arrangements. Do not ask for new credit and do not ask for credit limit increases.

Pay a little extra toward the principal of loans, credit cards, and other debts. This reduces the overall cost of the credit extended to you. You may even consider talking to your creditors about increasing your monthly payments. Obviously, you only want to do this if you have carefully drafted a workable budget that allows you to live within your means.

If you must be late on a bill or have a hard time making payments, do not ignore the debt. Instead, contact your creditor right away and make payment arrangements. This not only keeps you in the driver’s seat of your indebtedness, but it may also protect you from fees, surcharges, and debt collector harassment.

Make no mistake: you still owe the outstanding debt. At the same time, by being intimately aware of your accounts’ statuses, you avoid taking on more credit than you can handle or garnering a bad mark on your credit profile.

Generally speaking, there are five early signs of bankruptcy that consumers should be aware of:

1. Debtors access one credit account and withdraw cash to pay another. Known colloquially as “robbing Peter to pay Paul,” this use of credit is no longer a means for consumer purchases or coverage of emergency bills, but instead the credit accounts are treated as everyday budgeting tools. This is one of the first signs that financial trouble is on the horizon.

2. The next sign that hints of a potential future bankruptcy is the effort to incur further credit accounts. These are required to maintain the debt payments that are no longer covered by using already available credit. Before long, the amount of outstanding debts becomes so severe that there are no sufficient assets left in the debtor’s possession to cover the payments.

3. Debt collector harassment is the next sign that a bankruptcy may be required. Debt collectors are agents of the various creditors with which the consumer has contracted for the use of loans and credit products, and when repayment is not made in accordance with the requirements of the loan agreements, these agents have the legal right to contact the debtors. Consumers with a number of outstanding accounts are quickly left feeling anxious, embarrassed, and harassed, and it is only a matter of time before the consumer will seriously consider insolvency for relief from debt collection efforts.

4. An informal debt negotiation or settlement fails. Savvy debtors will seek out the help of credit counselors, and in so doing learn not only how to manage their funds, but also how to negotiate with creditors. At times these negotiations bear little fruit, and the creditors may refuse to work out payment options that vary from the initial contractually agreed upon rates, amounts, or dates. In these cases a debtor may feel that s/he has no choice left but to appeal to the courts for protection under the Bankruptcy Act.

5. A formal debt agreement or personal insolvency agreement fails. The last but most certainly grave sign  is the failure of a formal debt settlement effort. These efforts are governed by the Bankruptcy Act, and if they fail, there is little recourse left for the consumer but to seriously consider becoming bankrupt.

Informal Debt Agreement Alternatives: Enlisting the Help of a Debt Counselor
Consumers should think long and hard before resorting to bankruptcy protection for debt relief. Although radical in its debt eradication, the consequences are far reaching. Informal debt agreement alternatives include the services of a debt counselor. Much like creditors have debt collectors aiding them in seeking repayment of a debt, debtors have debt counselors assisting them with the nuts and bolts of credit management.

In some cases these debt counselors may help with drafting a budget, assist consumers to understand their legal rights, and also provide support to them when dealing with creditors. Debt counselors may actually even take over some of the negotiations with creditors’ agents, providing consumers some much needed relief from the attentions of debt collectors.

Debt that is simply too plentiful for a structured but still informal debt settlement may require the path of bankruptcy; it is noteworthy that even before opting for a formal bankruptcy filing, there are still other options available.

One example is the binding debt agreement. In many ways it mimics the informal negotiations that may be undertaken with the help of a debt counselor, but in addition to providing a settled amount for satisfying the debt it also offers legal protection to the consumer.

If this solution does not meet the consumer’s needs, there is the personal insolvency agreement; it is a final alternative prior to filing for bankruptcy. There are no limitations on the incomes, assets, or debts involved, and it may entail a lump sum settlement to an array of creditors, and even various asset liquidations that are then used for meeting the outstanding balances due.

Only when informal as well as formal means of debt settlement are exhausted, bankruptcy should be a viable option.

Bankruptcy, Debt, and Collectors
Collectors are agents of creditors. It is their function to secure payment of outstanding amounts owed. They are persistent, and they have the legal right to contact consumers with outstanding balances repeatedly; moreover, they may use the telephone and also the mail for this purpose. That being said, a consumer who is already anxious about outstanding debts easily interprets the efforts of a debt collector as being harassing.

Making matters worse, a good many consumers have more than simply one outstanding balance, and it is therefore not unheard of to receive phone calls and demand letters from three, five or even more agencies. Consumers who simply cannot see an end to these collection calls and letters find that bankruptcy provides the ultimate debt relief.

Exhausting All Options Prior to Bankruptcy
It is true: debt collectors are hard to deal with; however, it is not always necessary to immediately consider bankruptcy. For example, debt collectors may actually be able to help consumers understand which – if any – hardship assistance provisions they may qualify for. Several creditors offer these kinds of programs to their debtors, and they may allow for an amending of the credit contract or even for an increase in the grace periods, so that consumers have extra time to make payments.

Another way of stopping debt collector harassment is with the help of a financial counselor. This professional offers debtors an education in their rights, such as they are dictated by the Consumer Credit Code, and also provides hands-on help with budgeting. Moreover, the counselor may also speak with debt collectors on the client’s behalf and seek to settle debts.

When All Else Fails
Of course, not all creditors agree to an informal settlement of outstanding consumer debts. In these instances, a debtor may have to take formal steps to enjoy relief from debt collection efforts. First and foremost, a debtor may seek to undergo a formal debt agreement with creditors; if this effort fails, a personal insolvency agreement may yield the aid needed.

Should even this prove to be ineffective in dealing with the consumer debt, bankruptcy is a last and final resort that not only helps consumers with unmanageable debts to get a fresh start, but it also provides legal protection virtually immediately ceasing all debt collector harassment.

Be Practical

Whether you have filed for bankruptcy in the past, or find yourself teetering on the brink of it now, a good way to determine if your budget is at fault is to perform a simple exercise. If you remove all recurring credit card bills, medical bills and other loans from what you spend each month, are you still struggling financially? If so, you probably have a problem with keeping a reasonable budget, and you are very likely to end up looking for financial help.

To create a good budget, you need to be practical; you must think in terms of “needs” versus “wants”. Each and every time you go to buy something, make it a habit to question yourself regarding how imperative the item actually is. If you can definitively say that the item is necessary – in the case of a food staple like milk, for instance – then purchase it. However, if the item is deemed extraneous in some way – for example, it is just a different type of cheese when you already have cheese at home – then forgo it. Doing this every time you go shoopping will help keep you from wasting a lot of money on unnecessary items – and keep you within your budget.

Set Aside Money

Find ways to save money wherever you can; for example, cut down on the number of times you go out to eat every month. Take the money you would have spent and put it in a savings account. That way, should an emergency occur down the road, you will have some cash saved up to help deal with it properly. Indeed, unforeseen issues are what often propel people into bankruptcy; having a good amount of cash set aside can help mitigate such occurrences tremendously.

When saving up money, remember that every cent truly does count. Reward yourself on your saving habits by allowing yourself an indulgence or two every month. Keep a detailed chart of how much you have saved as a motivator. Be practical about what you spend your money on, and save money wherever you can.

Not all debts are covered
Did you know that your child support or spousal maintenance debt will not be covered? Moreover, monies owed to the Higher Education Contribution Scheme and also the Department of Social Security remain due and owing. If a big portion of your debt consists of outstanding amounts to these agencies, you are not a good candidate for bankruptcy.

Bankruptcy Offers Relief from Secured and Unsecured Consumer Debts
On the flipside, if you have accumulated a lot of unsecured consumer debt but are no longer able to pay all of your creditors, you may indeed be a good candidate for a bankruptcy. The same holds true for secured creditors, as long as you are willing to relinquish possession of assets that secure these loans. This usually refers to property secured by a mortgage or bill of sale.

Is the Time Right for a Bankruptcy?
Do not go ahead until after you have consulted extensively with a financial counselor. Only after you have taken the time to write down all outstanding debts, principal balances, monthly payments, and also all forms of income, will you have the opportunity to soberly evaluate your overall indebtedness.

Alternative solutions
Debtors oftentimes find that a binding debt agreement sufficiently lowers the amount of outstanding debts and makes it affordable again. If a debt agreement does not provide the needed relief, a personal insolvency agreement might just offer the flexibility needed to settle debts in such a manner that a bankruptcy is avoided. Although both of these options will have adverse effects on your credit profile, they do not wreak the havoc that an outright bankruptcy filing entails.

Only after you have considered these options – preferably with the help of a skilled debt counselor – does bankruptcy hold the opportunity for viable relief. If you are at this point, then the time is now; you should file for bankruptcy quickly to take advantage of the court ordered debt eradication and settlement.