Bankruptcy And Debt Management: Understanding The Process And Its Consequences – Bankruptcy begins when a person or company goes to court to review their assets and debts. The court may then cancel certain debts or approve a proposed repayment plan.
Usually the debtor (ie the person or company who owes money) initiates the procedure, but in certain circumstances the creditor can compel it. This is called “involuntary bankruptcy”.
Bankruptcy And Debt Management: Understanding The Process And Its Consequences
While bankruptcy can give you a second chance to get your finances back on track, it’s a pretty extreme option and comes with some limitations.
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This can make it difficult to get a loan, rent an apartment or use other services in the future
“Student loan debt is not discharged in bankruptcy. It’s the crutch of all debt.” — Suze Orman
There are many different types of bankruptcy, each with its own set of rules (named after chapters of the US Bankruptcy Code). The most commonly used options are:
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This is usually the easiest way to apply and the process is usually completed within three to six months. The debtor must give up certain assets and the proceeds are used to pay creditors. State and federal laws govern what assets you can keep, such as your home, car, clothing, or other personal belongings.
The debtor proposes a plan to repay the creditor without giving up his assets. The purpose of Chapter 11 is to help financially distressed companies find a way to return to profitability while paying back debts over time.
A person develops a plan to pay off all or part of the debt over three to five years. Debtors can keep their assets, but any income that exceeds what is needed to cover basic expenses usually goes toward their debt.
Debt Management Solutions
Although people think of bankruptcy as announcing the death of a company, companies can, and often do, continue to thrive. Some large companies go through the process like this:
Bankruptcy is a legal process for businesses and individuals who want to reduce debt. There are many different options, and depending on the type, debtors may be able to discharge certain debts entirely or work out a repayment plan. Bankruptcy has many pros and cons, and while it can help some people rebuild their finances, it can affect your credit score and require you to give up certain assets. Money problems with debt in Singapore? Here’s Your Roadmap to Debt Relief No matter how much debt you have, here are some ways you can get out of it. by Sim Kang Heong May 3, 2018
There are many reasons why people have difficulty paying off their debt. Some may have overspent by spending money that was not available in the future, perhaps due to job loss or failure to keep promises from a third party. Others may have taken out loans to finance their businesses. Gambling is another root cause of unpayable debt.
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Regardless of the cause of your debt problem, it’s important to admit you have a problem and then make a plan to solve it. Filing for bankruptcy is probably the last thing you should do, at least until you’ve exhausted all of the debt management options available to you, as described in this article.
This process can take months or even years, so be patient and know that with each payment you are one step closer to being debt free.
Before you can plan the best way to settle your debts, you need to know exactly how much you owe each creditor. You can purchase a copy of your current credit report to see exactly how much you owe.
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This may sound obvious, but also avoid adding more debt to your name. If you already have $40,000 worth of debt, adding another $2,000 doesn’t seem like much. But at the end of your debt relief journey, that $2,000 could mean another 2-3 months before you can get your debt-free life back.
Most credit card companies offer this service, called a balance transfer. Allows you to consolidate debts from multiple credit card companies (with high interest rates) from one lender at a lower rate or even without interest, although you may charge a fee Fixed administrative position (approx. 2%).
In addition to simplifying the repayment process, it helps avoid the increase in interest on the credit card account.
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Repayment of the balance by transfer has an interest-free period of 3-12 months, after which a hefty interest is charged. Like credit card bills, there is a minimum repayment amount that you must pay each month or face a penalty. late fee.
Therefore, only perform a balance transfer if you are confident that you will be able to pay off the balance transfer within the interest-free period.
Despite being perceived as cold, uncaring institutions (especially if you owe them money), banks may offer alternative ways to settle unpaid credit card bills and unsecured debts by installments.
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The effective interest rate for personal loans is around 8-10% per year. This number is lower than your credit card debt, which is much higher (over 20%).
In addition, personal loans have terms ranging from 1 year to 5 years, which means you have a longer time to pay off the debt and have more affordable monthly repayments.
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Read more: Effective interest and simple interest rate: Here’s what you need to know about the loan to be repaid
If you can’t manage your debts with a balance transfer, repayment plan or personal loan, the next step is to plan how and in what order you will pay off your debts. Since you have a limited number of funds each month, you need to make sure you deploy them as efficiently as possible.
Not meeting your minimum repayments can be very costly, so avoiding these extra fees should be a priority. The balance of the cash must be used to pay off debts with the highest interest.
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While you want to pay off your debt as quickly as you have the cash, be aware of possible early repayment penalties (for certain loans).
If your unsecured debts (credit cards and personal loans) exceed 12 times your monthly income, you may qualify for a debt consolidation plan (DCP).
This is an initiative of the Association of Banks in Singapore (ABS), which allows one of the 14 DCP participating institutions to consolidate their debts between different financial institutions at a lower interest rate by paying a fixed monthly amount according to a schedule and repaying all outstanding balances in full.
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Remember that when you apply for DCP, all your existing unsecured credit will become inactive and you will not be able to get new credit unless the loans are for education, training, health or business purposes.
You get a credit card with a credit limit equal to your monthly income to manage your daily expenses and cash flow.
If all the above debt management tools fail, you can contact Credit Counseling Singapore for help and advice to solve your debt problem.
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They can offer advice, encouragement, and connect you to resources that can help you get out of debt.
As you can see above, there are many tools available to help you solve your debt problems. This journey can take months or even years, so once you’ve made a plan, be patient and live your life to the best of your ability, knowing you’re doing things right.
HDB Who is the primary user of an HDB flat and when is it necessary? During bankruptcy proceedings, the following question is often asked: “What can I do to prevent this from happening again?” Life after bankruptcy can seem confusing and you may have some questions. Our free Life After Bankruptcy report has answers to help you move forward in life and covers a wide range of topics.
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Bankruptcy should not be taken lightly. And once you’ve successfully recovered from bankruptcy, it’s important to take effective measures to prevent future financial problems. Managing money is essential to planning for the future. Here are our 7 simple tips for better money management after bankruptcy.
To learn more about our debt relief process, please contact our attorneys. Free bankruptcy advice. Track expenses
While this may be the easiest way to understand your money, tracking exactly where your money is going is often overlooked. Looking at your bank statement or keeping a journal of where you spend your money will quickly highlight where you’re spending too much or areas where you can cut back.
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Once you’ve tracked your expenses and identified clear patterns in how you spend your money, you can allocate and distribute your money in a clear budget.
Budgeting can seem like a boring job. You probably have a good idea what it is
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