Chapter 7 - Chapter 7

That's right, this chapter is about chapter 7 and chapter 13. It's a guide to not having to file either of these (or chapter 11 for businesses).
Steering clear of debt troubles is pretty straight forward under ideal conditions. The ideal condition is that you are employed (or rich, but that doesn't belong here), save money most months out of the year, and keep control of your debt to income ratio. In this position, you can pay extra towards your loans to pay them down faster then pay them off from money you have saved/invested. Most loans are going to cost you more in interest so it goes in your favor to pay off bills from your savings account if you are paying more in interest than you are earning. You can take the money you were paying monthly on the bill that is paid in full and apply that amount to other loans. It's a good idea to target the loans with the highest interest rate.
There are times when we can't steer clear of financial pitfalls. Today unemployment is a big concern as well as variable rate loans inching higher and higher. If you find yourself in a position where what you owe in monthly bills is more than what you take home it is time to seek professional help. I recommend starting with a bankruptcy attorney first and avoid the "debt eraser's" that advertise on TV and the internet. Most bankruptcy attorney's will defer their fee as part of your restructuring. You might not have to file bankruptcy but it is best to get on top of the situation BEFORE you are flat broke and creditors are calling all the time.
Filing a Chapter 7 means that you are starting with a clean slate. You owe nothing but the duty to keep yourself in better financial shape in the future. Filing a Chapter 13 means that you keep the majority of your belongs and you will pay the creditors the principle amount. They will not receive interest payments from you. Again, the best strategy is to avoid getting into trouble in the first place.
How do people get themselves into trouble?
#1 - the person borrows too much money.
#2 - creditors lend the person too much money.
Credit Unions have always been pretty good about making sure that borrowers are not getting themselves in to deep. The tend to like you to have a 42% debt ratio only if you also have a mortgage. Other financial institutes have allowed others to get themselves in over their head or set themselves up to be in over their head in the very near future. I think everyone is aware of the resent mess Wall Street and the banks put us in.
Why do we borrow too much?
People no longer try to save money and it only takes one or two major unexpected expenses to get people into money trouble. People want the absolute most of "whatever" they can afford. This means buying the most house, the most car, the most boat, the most favorite toy they can afford. Often times it means buying more than one of them if the banks let them!
Save for the future and be patient if it takes time to save for what you want.
Make sense?