Get Bankruptcy Advice Early
Many people wait longer than they should before consulting a bankruptcy attorney. It is one of the most discouraging things for a bankruptcy attorney. You may cash in investments, spend savings, and retirement money, to try to stay afloat before you contact an attorney, and depleting those assets may make it more difficult to get a fresh start.
When you start having problems paying your bills, or suffer a financial reversal: lose your job, have a car repossessed, go into foreclosure of your home, or your business starts to fail; you should contact a bankruptcy attorney before you make decisions that eliminate some of the protection or benefits that bankruptcy could provide for you.
Common mistakes that a bankruptcy attorney would try to counsel you to avoid, include:
- Spending your savings, selling assets, or getting another loan against your home, to keep paying your bills till you have little or nothing left. You are entitled to keep most of your property. Find out how much.
- Using a home equity loan to pay your credit card debts, or other unsecured loans. This can turn a dischargeable unsecured debt, into a secured debt that you will have to pay, and can lower that value of the property that you can keep, or make it impossible to pay the new, higher loan.
- Paying a mortgage modification company to help you with the debt on your home. Generally it is best to contact your lender directly for a modification – you can do it yourself. The Federal Trade Commission is investigating a lot of mortgage modification fraud.
- Cashing in your IRA, 401(K) or other retirement account to pay debts. In most states, including Delaware, these assets are exempt and can be kept in a bankruptcy without having to pay unsecured creditors. You should be able to afford to retire at some point.
- Paying on credit card debt, to keep those payments current and avoid higher interest rates, while getting behind on your house or car payments. In order to keep your home and vehicle, you are going to have to pay those payments.
- Taking bad advice, from someone who is not a professional, about what bankruptcy is all about. Advice that you get for free is generally only worth what you pay. A common fallacy is that you can only keep a small part of what you own.
Bankruptcy laws are designed to give you some minimal protection from creditors. You should not lose the benefit of a full fresh start by making decisions that deprive you of the opportunity to get all the debt relief that a Chapter 7, Chapter 13, Chapter 11, or Chapter 12 bankruptcy entitles you to.
Basically, most people want to avoid bankruptcy, and, too often, they don’t fully consider it as an option until their financial situation is horrible. Get counseling and advice before your situation is hopeless and make informed decisions. You are entitled to hang on as long as you can, but do it knowingly, and with an understanding of your financial position as you move forward.
James C. Reed is an attorney that you can relate to, be comfortable with, and who will explain your legal rights to you. Get advice from someone who cares about your unique situation and wants to help you.