Personal Debt Management Example

Essays on Personal Debt Management Essay Bankruptcy Declaration Task: Bankruptcy Declaration Introduction This is a legal proceeding whereby individuals can have a fresh way of starting finance. It can work well in some cases as a process of solving financial issues especially when done at the right time. However, it may not provide answers to all problems related to finance hence, may not be the right step for everyone. It has numerous merits and shortcomings associated with it. There are alternatives to it which can be applied. These among other factors such as debt payment will be looked into. Advantages of filing bankruptcy According to Ventura (2008), it is a â€Å"discharge† of debts in that the legal obligation to debt payment is eliminated. This enables the restoration of utility service for the fact of non-payment of bills incurred before. The creditors, therefore, are prohibited from pursuing the bankrupt individual or his property. The incomes received are not subject to payment of debt. The debtor,, therefore, is protected from fore closure thus giving the debtor breathing space. Disadvantages of filing bankruptcy It is only allowed once after every six years of application. It also eliminates some right of secured creditors. The collaterals acquired cannot be kept unless payments for them are ongoing. This means that house, car or other items that are under debt can no longer be withheld by the bankrupt individual. By so doing, one looses credit cards. Non essential positions are also lost. It brings about the inability to obtain loans and mortgages for some time. One cannot become a director of limited companies despite one being denied tax refund by the federal government based on the bankruptcy. It comes with an embarrassment and not all debts are discharged. The filling process comes at a cost. Attorneys levy a fee on this service depending on the type of bankruptcy to be filed. Hence it is advisable to sought alternatives to filing bankruptcy. Alternatives to filing bankruptcy Shumway (2001) argued that Judgement proof is one of the basic alternatives that involve taking of no actions at all. Mostly when one has a small income, when the creditor sues them, they can’t find anything to legally hold due to lack of it. Another alternative to this maybe calling the creditors; this makes the debtor to appear not to be shunning away from the situation but being frank. Therefore, calling and convincing the creditors about the financial status can help design remedies from their own ideologies. The debtor may consider chalking out the budget as an alternative by looking into the monthly income and expenses. As a result, a wider understanding of the problem can be attained thereby avoiding bankruptcy. Research by Nathalie and Stewart (2005) supports that a balance transfer can come handy rather than filing bankruptcy from higher rate loans to lower rate loans. Refinancing of loans with better terms may apply in such a case. Another alternative maybe negotiations and settlement of debt, which requires confidence to face the debtors for a fresh repayment plan. Credit counselling services may be sought for especially from non profit organisations or the web; making of formal proposals by individual voluntary arrangement on the way of resettlement instead of filling bankruptcy. Conclusion Considering the above disadvantages of filling bankruptcy and alternatives, it is not advisable for one to file bankruptcy. Besides, it is unethical to fail to pay debts. This is because various alternatives to this are available other than the disadvantages associated with the failure to pay debts. Negotiations are important in case one cannot pay their debts. Choosing to file bankruptcy subjects the debtor to more harm than good. Father, there are ways of going about the problem apart from filling bankruptcy. References Shumway, T. (2001). Forecasting Bankruptcy More Accurately. The Journal of Business, 74(1). Retrieved from http://www.jstor.org/stable/10.1086/209665 Ventura, J. (2008). The Bankruptcy Handbook: Everything You Need to Know to Avoid Bankruptcy, Get Rid of Debt, and Rebuild Your Credit. California, CA: Kaplan Publishing. Nathalie, M. Stewart, P. (2005). J.k. Lassers the New Bankruptcy Law And You. New Jersey, NJ: John Wiley Sons.