Filing for bankruptcy: is it the right move?
Bankruptcy can sound very scary to most people; even the word itself can feel very ominous. The media constantly bombards us with stories of high-level businesses and organizations that seemingly go bankrupt overnight, with most being branded negatively.
However, bankruptcy is a credible option in certain cases. It often paves the way for a successful future, depending on your circumstance. Is bankruptcy right for you? Below are a few questions that can help you in assessing your financial state.
• Are you only able to make minimum payments on credit cards?
• Are you constantly fielding calls from bill collectors?
• When thinking about sorting out your finances, do you feel a large amount of stress and sense that you’re out of control?
• Do you use your credit cards to purchase all your day to day necessities as well as utilities and rent?
• Have you considered consolidating your debts?
• Do you not have a rough estimate of the amount that you owe?
If the answer to two or more of the above questions is yes, then you need to put some thought into your financial situation. In basic terms, bankruptcy needs to be filed when your debts are more than what you can afford to pay.
Before filing for bankruptcy, take a look at a few things that you most certainly don’t want to do beforehand:
1. Don’t pay creditors
Don’t make any significant or substantial payments before filing. You should still keep paying as much as your debts as you can, including routine credit card payments and paying your utilities. However, you should avoid a large payment to a single creditor, as this can create future problems. A large payment or paying off your whole debt to someone is considered a ‘preferential transfer,’ and the creditor can be sued by the court at a later date due to this unfair benefit over other creditors.
2. Don’t incur new debt
Unless it’s necessary, don’t get into new debt. Doing this can have serious consequences, as creditors can claim that you took on that debt knowing that you would not be able to pay it back. This cation can be considered fraud, and that particular debt will not be a part of your bankruptcy proceedings.
3. Don’t keep the information that you’re filing to yourself
If your creditors are suing you, or are threatening to do so, it’s important that they are aware that you will be filing for bankruptcy. If they are not privy to this information, they may garnish your wages or seize your assets as part of a debt repayment, and it can be expensive to get this money or assets back once you’ve filed.
4. Don’t give out incorrect information
When filing, you are required to provide full and accurate information. You need to provide all the information regarding your debts, accounts, assets and other financial information. It may be tempting to leave out some assets, but this can be considered fraud, and get you into even deeper trouble, including criminal charges.
5. Don’t touch your retirement funds
In a lot of cases, you can retain retirement funds when you’ve filed for bankruptcy. Most of the time its preferable to file for bankruptcy and keep your retirement funds for when you really need them. Since laws regarding retirement funds can vary from state to state, it’s important that you talk it over with a qualified attorney before you make any decisions regarding these resources.
Declaring bankruptcy is not a solution that should be taken lightly. It’s a legal choice that can be made when you’re in a hopeless financial situation, but it might be the best thing for your future. For any questions, don’t hesitate to call us.