Avoiding Bankruptcy

Bankruptcy Alternatives
In recent years, more and more people have been using bankruptcy to eliminate unmanageable debts. One alternative is for the debtor to write to the creditor and explain his financial standing. The debtor can give a detailed plan about how he will pay back his debts, and if the two can come to some agreement, all new arrangements should be set out in writing in order to be legally binding. The creditors may even advise the debtor on other bankruptcy alternatives.

The debtor may also find liquidation as a viable option. Here, the debtor should consider selling some assets and purchasing cheaper alternatives i.e. selling one’s home and then moving into a rental.

Voluntary Bankruptcy
Debtors can legally declare they are unable to pay outstanding debts. Here, the debtor starts the bankruptcy action by proactively seeking protection from creditors. After the creditors are notified of the debtors’ filing for voluntary bankruptcy, the court will investigate the case in order to either approve or deny the bankruptcy request. Voluntary bankruptcy differs from involuntary. In voluntary bankruptcy, the creditors are the ones who proactively pursue legal means to have a party declared bankrupt. In involuntary bankruptcy situations, the debtor must prove why the action should not be approved or why their assets should not sold.
Debtors who seek voluntary bankruptcy generally have no other viable solutions and in some cases they may be able to retain certain assets. In some jurisdictions, a debtor can hold onto assets that are considered necessary to earn a living. Other jurisdictions state the debtor’s family’s primary residence is a different kind of asset and thus immune from liquidation. Other jurisdictions state that certain kinds of loans, specifically mortgages, are exempt from bankruptcy actions, and the debtor will still owe money on his home, regardless of the state of his bankruptcy.

Bankruptcy Liquidation
Bankruptcy liquidation involves selling all assets to pay outstanding debts. By requiring the sale of certain assets to repay some of the debt, the court of jurisdiction ensures that creditors receive at least some compensation. Liquidation also benefits the debtor, who is freed from a debt load he could not pay off under any circumstances. The rules for filing for bankruptcy liquidation vary by jurisdiction, and the appropriate assets also vary. Assets considered necessities are generally exempt from sale. Basic clothing, household appliances, and working equipment would likely be considered necessities and thus be immune from liquidation.

Bankruptcy Exemptions
A person is entitled to keep certain amounts and assets when filing for personal bankruptcy in order to maintain a basic standard of living. Some exemptions include the following: (1) Any personal injury compensations payment up to $18,450; (2) life insurance policies with a value of $9,850; (3) $20,200 in equity; (4) motor vehicles valued up to $3,225; (5) unused portions of homesteads up to $10,125; (6) up to $9,850 of household items; (7) Work-related books and equipment up to $1,850.

Joint Savings Accounts and If You Should Have One

The purpose of a savings account is to store money in a place where it accrues small amounts of interest. Banks, money market funds companies, and credit unions offer such checking and savings accounts to customers. Savings accounts are safe places to store money as they are insured up to $250,000 by the Federal Deposit Insurance Corporation, not to mention that customers earn interest on the deposits. This insurance is in place should the financial institution declare bankruptcy or have mismanaged funds.

At one time, banks would offer higher interest rates than credit unions, though presently credit unions have competitive rates. Money market funds’ rates fluctuate based on the stock market. It is wise to shop around for the best incentives prior to opening a savings account.

Savings accounts are profitable for financial institutions because the customer is lending the money to these institutions who then loan out that money to other customers with a higher interest rate, some of which goes back to the lender-customer. As such, both the financial institutions and the original lender-customer profit from the savings account.

Savings accounts generally require a minimum deposit of $100, though most banks allow for certain circumstances. Children can open savings account with $5. Savings accounts are also advantageous should the customer not plan on spending money for a few months. Whereas checking account pay less interest and may charge the customer bank fees for using the account, savings accounts generally have higher interest rates and do not penalize customers for failing to access the account in a given time.

Joint Savings Account
Joint savings accounts are established to benefit multiple individuals. Often, married couples establish these accounts to build financial security; other groups such as domestic partners, friends, and even minor children have joint accounts for short term projects or long term financial security. Joint savings accounts are less volatile than most other investments strategies, as their interest returns, though nominal, are consistent and secure. As such, these are good strategies for those who do not care for aggressive and risky forms of investing.

Joint savings accounts have other advantages too. If both parties on the account are employed, then they can apportion some of their wages to the account, which makes it easy to grow savings without the burden of manual deposits. Also, joint savings accounts can be very beneficial should an account holder dies. In this situation, the assets of the account will be available to the other account holder; otherwise, the assets would be frozen until the will specifies who receives what. Because the account will not be frozen, the surviving account holder will still have some, if not, full access to his funds, though this may depend on the jurisdiction. It is important the account holders understand the local rules that apply in addition to trusting their fellow account holders.

Finally, one can utilize joint savings account to fund checking accounts, which can prevent potential overdrafts should the account holder face an unexpected situation.