Trapped. That is how many people feel when they cannot meet their monthly payments and the debt keeps building up. The idea of filing for bankruptcy is frightening – it may feel like “giving up.”
Yet, waiting to file for bankruptcy is sometimes the worst decision someone could make. Countless people choose to cash out their retirements, abandon their homes – even hide assets from creditors – before they file for bankruptcy. They do not realize that, had they filed for bankruptcy earlier, they may have been able to keep their retirement income, their home and their good character.
Here are a few things you should NOT do when struggling with debt:
- Abandon your home: Bankruptcy stops foreclosure. Depending on your financial circumstances and the facts of your case, you may even be able to keep your home after bankruptcy.
- Cash out your retirement accounts: Trying to fix your financial situation by dipping into your retirement sets you up for a lifetime of debt. If you file for bankruptcy, creditors probably won’t be able to access your pensions or 401K savings plans.
- Hide assets: We understand the temptation to hide assets from your creditors, especially when they are valuable to you. Yet, hiding assets is against the law. For example, if you hide even a small amount of assets from a bankruptcy court, the court can choose to deny your bankruptcy petition, leaving you to continue struggling with debt.
- Pay back friends and family members: Unfortunately, choosing to pay back your friends and family before you file for bankruptcy may be considered “preferential payment” or fraud. A bankruptcy court can require you to have your friend/family member reimburse you or may even go after your friend or family member for that money. This includes payments made up to 365 days before you file for bankruptcy.
If you are financially strapped, the best thing you can do is speak with a bankruptcy attorney about your options. You may find that you have little to fear from bankruptcy and a new, more positive financial future to celebrate.