This horrible economy, call it a depression, recession or what you will, has many people struggling to make ends meet.  Many American families are facing the prospect of having to declare bankruptcy.  High costs of basic commodities such as food, gasoline and heating oil along with a shaky job market are leaving many families with no other option.  Even those who are able to pay their mortgages may be faced with the reality that their home is worth much less than what they owe, further adding to the problem.  Savings invested in the stock market have in many cases been depleted due to a dismal market.

All these factors have combined to leave many hanging on the precipice of financial ruin.  Though bankruptcy in many cases may seem like the best or the only option, it can have serious lasting effects on a family’s financial future.  Though bankruptcy can often dissolve many debts, it usually requires liquidation of many of the family’s assets and leaves them unable to acquire replacements in the near term.  New bankruptcy laws have also instituted requirements that may not be possible for a family to abide by.  If at all possible, bankruptcy should be avoided.

Bankruptcy’s effect on credit is disastrous.  Upon declaring bankruptcy, a person’s credit score basically drops to zero, just as if you have never had credit.  It will take years for a decent credit history to be rebuilt and in the meantime, loans are pretty much out of the question.  A bankruptcy will remain a matter of public record for 10 years and during that time, any credit one does obtain will come with a much higher interest rate and other limitations such as higher down payments.

Filing for bankruptcy itself can be quite costly.  You will have to pay all required filing fees, miss work to attend required meetings and will almost certainly need a lawyer.  Though some attorneys advertise affordable bankruptcy services, the term relative is subjective and will likely not seem affordable to you.  In short, the money you spend filing bankruptcy could be put towards satisfying creditors and avoiding it in the first place.

Fortunately there are some other options available to you.  Many nonprofit agencies exist to help you negotiate with creditors and reduce debts without formally filing bankruptcy.  They can help you reduce the total amount owed, reduce interest rates, eliminate fees and set up a consolidated monthly payment plan.  These measures are often enough to get people back on track and avoid the lasting effects of bankruptcy.

Keep in mind that some of these agencies do charge a fee for their services.  Often, the same results can be achieved by negotiating directly with your creditors.  The creditors want to ensure you are able to pay as much or more than you do.  They know that if you are forced to file bankruptcy that there’d a good chance they will never see a dime.  This is a great incentive for them to work with you.

If you find yourself slipping into the financial bottomless pit, don’t put off doing something.  The longer you wait the more desperate your situation will be and the harder it will be for you to avoid bankruptcy.

With business still not picking up, especially to small businesses, it is not a surprise to see business owners wanting an OIC with IRS. This business owner could be deep in debt besides to IRS. That even if he sold his business, it would not break-even to settle tax debts. This business owner may just be praying right now for a tax debt relief.

Bankruptcy, whether personal or business, can be used as a reason to ask for tax relief from IRS. For a business, showing financial and income statements proves how badly in shape the business is in. And that paying for tax debts at this point is simply impossible. IRS in turn will consider this and might allow a business owner for a tax relief.

The settlement could mean that this taxpayer will still pay the tax debts but the amount is reduced. It can be that any penalties will be abated, but the taxpayer has to pay the full amount in staggered payments. Alternatively, tax debts can be totally wiped out if the situation of the business really merits it.

Technicalities on how long the tax debt has to will, however, hinder tax payers’ hope for a tax debt relief. Because according to tax codes, tax debts unpaid for three years must be paid full before tax relief is granted. And the very recent tax debts and penalties are ones subjected to legal proceedings. That is to consider the said debts for a tax debt relief.

While the business owner cannot also use tax debt relief as a means to escape from paying for local taxes. It is because local tax debts cannot be included in the declaration of bankruptcy. Instead, this must have paid in full before business income tax debts can reach a settlement.

There is much other tax debt payment that bankrupt business owner settles before finally availing tax relief. Compliance of the business owners is demanded by IRS, lest no tax debt relief will ever be granted. In other words, bankruptcy cannot be relied solely as a way to escape paying for taxes. It is because there are non negotiable tax debts that must be settled first.

Nowadays, a lot of people are going through bankruptcy as a result of present state of economy. Whereas it is true that bankruptcy just isn’t something that folks would normally need to cope with, it’s also surprising that there are people who really suppose declaring bankrupt might be the quickest option to deal with their monetary problems. Reality to be told, whereas all of the credit card debts and other money owed are wiped off by declaring bankrupt, there are undoubtedly serious implications that you simply won’t be aware of.

To begin with, the greatest impact of bankruptcy on an individual is normally not coming from the monetary side, but rather in the form of a psychological fall out. Aside from feeling ineffective and incompetent, one will really feel totally stripped of his self esteem. Based on surveys performed recently on those who have declared bankrupt, it has been reported that they can’t even walk with their heads held high as they are filled with embarrassments with themselves. They really feel as if they’re the garbage of the society.

Moreover, one has to understand that your financial future will probably be seriously affected by the declaration of bankruptcy. You will definitely face an uphill battle in trying to repair your credit score. More often than not, it takes no less than 10 years before your credit score can be good again. Moreover, your possibilities of getting a mortgage after bankruptcy, be it 5 years or 10 years down the road, can also be seriously affected.

All in all, it’s best to give it an extended and hard think before deciding to go for bankruptcy, for the implications may have a really long lasting impact in your life. Not only you’ll have to face plenty of embarrassments in addition to difficulties as talked about above, your family and kids will also need to bear the blunt. After all, it’s good to understand that bankruptcy is oftentimes not the only way out as there are a number of other choices for you to get around the monetary difficulty.

If you have started an individual voluntary arrangement (IVA) but are unable to maintain the agreed payments, bankruptcy could be an option to resolve your debt problem once and for all.

An individual voluntary arrangement (IVA) is a legally binding agreement with your creditors allowing you to settle unsecured debt over a fixed period of five years.

Once agreed, you pay as much as you can to your creditors and at the end of the arrangement, any outstanding debt is written off.

Thousands of people use IVAs every month to resolve their debt problems. The majority are able to maintain their agreed payments without any issue. However, if you are in an IVA and your financial circumstances change, paying the monthly instalments may become a problem.

A change in circumstances

If you find yourself in a position where you cannot afford to make your agreed IVA payments, the first thing you should do is speak to your insolvency practitioner (IP). This is the person who is responsible for managing the agreement.

Your income may have fallen, but if you can still continue to make smaller payments, your IP can ask the creditors to accept a variation to your IVA.

A variation would allow your monthly payments to reduce. However, to compensate for this, your creditors could ask you to extend the length of time your IVA lasts.

If you are unable or unwilling to make any further payments into your IVA, you could stop paying altogether. If you do this, then your IP will normally have to fail the arrangement.

At this point your creditors are once again free to take action against you to collect their outstanding debt.

The bankruptcy option

One way of resolving your debt problem if you can no longer pay your IVA is to declare bankruptcy. You simply have to wait for your insolvency practitioner to formally fail your arrangement and then you can submit a bankruptcy application to the court.

You should explain on your bankruptcy application form that you have made your best attempt at repaying your creditors by using an IVA but unfortunately have been unable to sustain the required payments.

Once bankrupt, all of your outstanding debts will be taken away from you and you will only be required to make payments towards your debt if you can afford to do so. Even then such payments will last for a maximum of three years.

If you petition for your own bankruptcy, you will need to pay a fee of £600 to the court. One way of paying this fee is to save the money you would otherwise have paid into your IVA.

Are you a home owner?

If you are a home owner, failing your IVA should be an absolute last resort particularly if you have equity in your property.

After your IVA has failed, the insolvency practitioner has a duty to realise any equity you own in your property for the benefit of your creditors by making you bankrupt.

As a result your home could be sold unless a family member or friend is able to pay to the court a sum equivalent to the equity which would otherwise be released.

If you have a debt problem, you should familiarise yourself about all of the options available to help. You should only start an IVA if you are confident that you can maintain the monthly payments.

After you have started an IVA, you could still decide to stop paying and declare bankruptcy. However, if you are a home owner, this should be an absolutely last resort as you will be at risk of losing your home.

For people in dire financial straits who are considering bankruptcy, one major hurdle or deterrent can be the question of the cost to declare bankruptcy. But few people actually know exactly what it will cost to declare bankruptcy. This article tackles that subject.

The first thing to consider is the court costs. At present, those are $274 for Chapter 7 and $189 for Chapter 13 bankruptcy. This might seem a little excessive considering the fact that the very reason you require such a service is because you are in a difficult financial situation. However, when you consider the potential of what bankruptcy can do in terms of relieving your financial stress, these costs seem far more reasonable.

However, when considering the cost to declare bankruptcy, the real cost is not in these court fees. As with most legal situations, the real price tag is attached to your lawyer. And you will need a bankruptcy lawyer. There is no way around the fact that fees for bankruptcy attorneys add up sometimes to a hefty chunk of cash. Particularly since reforms to the bankruptcy laws in 2005, which have made the process more complicated for lawyers. But the fact is that you simply have to have a lawyer and in doing so, and in having one you have faith in, you are more likely to file successfully, thus free yourself of much of your financial worry. If you are successful in declaring chapter 7 bankruptcy, you will be freed of many of your outstanding debts, thus freeing up funds to pay these fees. In addition to this, the automatic stay comes into play as soon as you file, which forbids your creditors from contacting you to demand any form of payment, thus making it easier for you to find funds to pay your lawyer.

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