How To Avoid Bankruptcy ? Tips On Avoiding Going Bankrupt

There are two main types of bankruptcy ? one is for companies and one is for individuals. In this article, we will briefly discuss these two instances so that first, you know how to avoid it and second, how you should deal with it if it seems like an inevitable thing for you.

Personal Bankruptcy ? Why It Happens

Overspending is the number one reason why bankruptcy happens. This may be because of:

• Not shopping around for the best rates (this includes impulse buying)
• Not knowing your finances ? how much can you really afford and how much do you need to pay every month
• Not taking charge of your credit history and taking too much of the ?buy now, pay later? promotions

It all boils down to losing control of your finances and if you cannot or do not take charge, bankruptcy may just be around the corner.

Personal Bankruptcy ? How It Happens

Bankruptcy can happen overnight ? a series of rapid purchases win big amounts that have the same due dates can be left unpaid and then, the interests snowballs along with the finance charges. Sooner or later, you will notice that you cannot keep up with your payments, you are starting to sell properties at a very cheap price just to liquidate them and soon enough, you are left with nothing. There are those who are called serial bankruptcy filers ? when the government has helped alleviate them of the burdens and stabilize their interest rates on debt, then they go out again and spend. This should not happen to you. Use the freed up money and resources to start a clean slate and a squeaky clean credit record.

How To Avoid Personal Bankruptcy

Some ways to help prevent personal bankruptcy:

• Know how you spend by listing down all of your expenses, even the small ones. Take a step back after a month and see where the bulk of your purchases go. There are even cute smart phone applications that help you tally your spending and shell out reports for you.
• Set a limit and stick to it, no matter what.
• Better yet, have automatic debit arrangements to a ?savings account? that you will use to pay bills. Then have a separate account, no matter how small, for your savings account. $20 a week can be something after sometime.

Corporate Bankruptcy ? Why It Happens

The same story can be said of corporate bankruptcy but this time it involves boardrooms and corporate stock shares. Overspending and the lack of a financial vision and plan, is the main culprit in bankruptcy. Involving the company in too risky operations or over projecting incoming sales revenue is another cause.

Corporate Bankruptcy ? How It Happens

Corporate bankruptcy can happen overnight, too, but most of the time, the tell tale signs are easily spotted earlier on. If the management does not control how much of the marketing budget goes on travel or even the purchase of supposedly helpful technologies, then soon enough you will have more debt than income.

How To Avoid Corporate Bankruptcy

You can avoid corporate bankruptcy by:

• Installing labor and resource saving devices
• Addressing only the most urgent financial issues that needs to be paid at a time, so that you stay as liquid as possible.

Image Credit: Sunface13 via Flicker Creative Commons License

Guest post by Chris Keenan. Chris is a writer for a nj bankruptcy attorney and regularly writes about personal finance matters.

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