Term Paper on Personal Finance
Introduction It appears from the phrasing of the brief details of the case that this case may involve either personal or business misfortunes. Since this issue is not clearly determined we will deal with both situations. Analysis Let us first deal if the case concerned an individual. Chapter 13 is a chapter of the Bankruptcy Code. This chapter permits a debtor to file a wage earner's plan for payment of a percentage of his debts from future earnings. Only a wage earner is entitled to avail the benefits of this law which came into existence in 1938. Most of the earnings of the wage earner must accrue from wages. Another condition is that the creditors must verify the debts. If the creditors do not appear their debts are wiped out. There is no limit over the amount of debt involved. Those who do appear to verify their claims are to receive their debts in easy installments over a three year period. Once a case has been filed under the wage earner plan the person is afforded legal protection against actions by debt collecting firms, court cases, assignments, seized bank accounts etc. The filing of wage earner claim may be seen by the creditors positively as an attempt to own the debts rather than run away from those. The only application is for more time to repay. This is not unlike debt rescheduling which the commercial and institutional banks(World Bank, IMF etc.) routinely engage in. The credit rating is not necessarily affected adversely. (Wipe Out Debts Without Bankruptcy) For those of your creditors who have sold their goods to you under deception as to their properties there is more bad news. Their debt may be wiped out altogether if the deception is proved under the Uniform commercial code. Another act namely the Homestead Act affords the debtor the facility of getting an exemption from of levy on the debtor’s residence. (The secret of Raising Money) The debtor has to apply to the trustee with full particulars and record. After examination of the case the trustee will determine which part of the debt is admissible for payment over three years. All installments are to be paid to the trustee who will in turn pay the creditors in order of their proportion of claims. (The secret of Raising Money) A person can borrow from several banks simultaneously. But first some ground work has to be done. Open a savings account and then a checking account at the bank/s. After some time apply for a small loan. Make sure the repayments are on time. Once the small loan is repaid, wait for some time. Then apply foe a slightly larger amount. Repeat this process till you get the credit required. If you obtain loan this way from ten banks whereas you need loan from only five you can get permanent credit facility. Money can also be raised by issuing common stock if you have a tried business venture. Another variation is issuance of penny stock. Yet another source is buying a business with cash flow problems for practically nothing because there are no buyers for such businesses.(The secret of
Raising Money) Bankruptcy on the other hand will blemish your credit history and credit rating. It will always show up even much later when someone does a credit check on you. It is a permanent scar. Under bankruptcy the debts are paid off through the division of assets among the creditors in a equal ration say five cents for each dollar owed. The wage earner plan assures full payment though over time. Chapter 11 of the United States Code contains chapter 11. Conclusion/Summary The above discourse is alright. I will however advise my friend very strongly to look at all these opportunities only after all other avenues available to solve the financial problems have been exhausted. In other words one should not take cover of these options deliberately with malafide intent. First of all full efforts should be made to bring the problem under control. This can be done in several ways. The unnecessary personal expenditure must be shelved. Luxuries should give way to austerity. If possible ride in buses or trains rather than using the car. Children can be put in less expensive educational institutions. Travel for vacation is to be declared taboo. The friend should take on those chores ( for instance snow removal) for which agency services are used. The friend should also look into the opportunity of doing over time or take on a part time job. The friend should resort to the wage earner plan only as a matter of last resort.