3 Simple Ways To Avoid Bankruptcy
Running a successful business is a huge accomplishment. However, the business itself needs a lot of care and attention to keep it moving in the right direction. One of the biggest mistakes that entrepreneurs make is to ignore the warning signs. It might seem scary to think that your business is on the path to collapse, but ignoring the signs can lead to even bigger problems.
Avoiding bankruptcy is easier with the right advice, and this blog will look at 3 simple ways that can help you avoid bankruptcy.
What is bankruptcy?
When individuals or businesses can no longer meet their financial obligations, they may file for bankruptcy. This legal process can provide relief by reorganizing the individual’s or business’s debts, or by liquidating assets to pay off the creditors. There are six types of bankruptcy that an individual may file: Chapter 7, Chapter 11, Chapter 12, Chapter 13, Chapter 9, and Chapter 15.
Each type of bankruptcy has its own specific provisions, but all types provide some form of relief from creditors. The most common form of bankruptcy relief is a discharge of the debtor’s remaining debt. A discharge releases the debtor from personal liability for the discharged debts, and prohibits the creditors from collecting those debts. A discharge also prohibits the creditors from taking any action to collect the discharged debts, such as lawsuits, garnishments, and telephone calls.
Although bankruptcy can provide much-needed relief, it also has significant consequences. A bankruptcy will stay on the debtor’s credit report for up to 10 years, making it more difficult to obtain credit, rent an apartment, or get a job. In addition, a bankruptcy may also have tax consequences.
Types of bankruptcy
There are several types of bankruptcy. These are:
1. Chapter 7 bankruptcy: This is the most common type of bankruptcy. It is for individuals who have too much debt and cannot pay it back. In a Chapter 7 bankruptcy, the individual’s assets are sold to pay off the debts. The individual is then discharged from the debts and does not have to pay them back.
2. Chapter 11 bankruptcy: This is for businesses that are in debt and need to reorganize their finances. In a Chapter 11 bankruptcy, the business can continue to operate while it restructures its finances.
3. Chapter 12 bankruptcy: This is for family farmers and fishermen who are in debt. This type of bankruptcy allows the farmer or fisherman to keep their farm or business and reorganize their finances.
4. Chapter 13 bankruptcy: This is for individuals who have a regular income but too much debt. In a Chapter 13 bankruptcy, the individual creates a repayment plan to pay off their debts over a period of three to five years.
5. Chapter 9 bankruptcy: This is for municipalities, such as cities or towns, that are in debt. This type of bankruptcy allows the municipality to restructure its finances.
6. Chapter 15 bankruptcy: This is for businesses or individuals who have assets or debts in more than one country. In a Chapter 15 bankruptcy, the individual or business creates a plan to deal with the assets and debts in each country.
3 ways to avoid bankruptcy
There are many ways to avoid bankruptcy. If you are having financial troubles, here are three ways to help you avoid bankruptcy:
1. Create a budget and stick to it.
When you are creating your budget, be sure to include all of your expenses, including your minimum payments on your credit cards and other debts. Make a list of your income and expenses, and try to find ways to reduce your expenses. You may need to make some tough decisions, like cutting back on cable, eating out, or taking on a second job.
2. Negotiate with your creditors.
If you are having trouble making your payments, contact your creditors and see if you can negotiate a lower payment or a debt consolidation loan. Many creditors would rather get something than nothing, so they may be willing to work with you.
3. Get help from a credit counseling agency.
If you are having trouble managing your debt, you may want to consider getting help from a credit counseling agency. A credit counseling agency can help you create a budget and work out a repayment plan.
Conclusion
The post you have just read will have hopefully shone some light on the common mistakes that people make, and will have helped you to avoid making them yourself. If you are a business owner, it is vital that you protect your company from any unnecessary risk that could hurt your business in the future. By taking the steps listed above, you will be able to avoid bankruptcy and keep your business safe for the future.