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Common Bankruptcy Mistakes
Delay and procrastination is a common mistake many make with a bankruptcy. Once overwhelming debt begins, or a significant debt related event such as a foreclosure, repossession, or wage garnishment is in process, it’s time to do something, and do it quick. Get the facts, and get them from an experienced Bankruptcy Attorney . Its human nature to not always deal head on with negative events, however in many debt related situations, if you don’t act timely you can lose your home, your car, your wages, and your peace of mind.
It’s understandable that most people who end up facing debt problems have never had to deal with lawsuits, foreclosures, wage garnishments, or creditor harassment before so they aren’t familiar with their options on how to proceed. Knowing when to consult a bankruptcy lawyer is important in understanding all of your debt relief options. As in many things in life, people will delay taking action until the last moment only to find it’s too late and many of their options are lost. Ignoring debt problems won’t make them go away.
If you’re in debt and need relief, take steps early on to get the process started. Whether its procrastination, or the inability to face the possibility of losing their home, car, or other assets, many people will wait to the last possible moment to consider filing for bankruptcy.
If you have debt that is no longer manageable, then bankruptcy could be an option. While there are bankruptcy alternatives which can be utilized to deal with debt, using a home equity loan to pay off credit cards or get out of debt as opposed to filing for bankruptcy may not be the best thing you can do. Borrowing from a secured creditor to pay an unsecured creditor is not a good idea. Borrowing your way out of debt doesn’t always work out. In fact, there are many people who get a home equity loan to pay off their credit cards but end up losing their home because they can’t afford to make the payments on the home equity loan.
Using a 401(k), IRA, or other qualified tax deferred retirement account to pay off debt isn’t usually a good option to address debt. Taking out a loan from a retirement plan or cashing in an IRA or 401(k) as opposed to filing for bankruptcy can actually cost you much more in the short term and long term. First of all bankruptcy protects IRAs, 401(k)s, and similar qualified retirement accounts. When you cash them out or withdraw cash you are creating an I.R.S. tax liability. So not only are you taking away from your future retirement, you are creating more debt with the I.R.S. Once the money is taken out of your retirement account, there is no longer any protected from your creditors, and you’ll likely owe penalties and taxes on any retirement accounts that were cashed in.
