Richard G. Fonfrias, J.D. – 8 Costly Mistakes to Avoid When Thinking About Filing for Bankruptcy
MISTAKE #1: Taking out a second mortgage against your home, often called a home equity loan.
You can't borrow your way out of debt. Many people hope to avoid bankruptcy by getting a home equity loan to pay their bills. Then, later, they end up losing their home when they can no longer make the payments. Don't trade unsecured debts for a home equity loan. The odds are good that if you file for bankruptcy, you will get rid of your debts and still be able to keep your home.
MISTAKE #2: Waiting until foreclosure or repossession to file for bankruptcy.
Some people make payments for years, trying to pay off sky-high medical bills and credit card debt. Then, after a judgment is entered – or their car is repossessed – or their home foreclosed – they file for bankruptcy. You can avoid these problems and still erase unsecured debt such as medical bills and credit card bills. Call me and I'll explain how.
MISTAKE #3: Making payments you can't afford to make.
It's this simple: Making payments you can't afford to make is money down the drain. Coming up with a few dollars to keep bill collectors happy puts you under a lot of stress. This temporary fix quickly overwhelms you because there are not enough dollars to keep all your bill collectors happy.
MISTAKE #4: Transferring assets out of your name to keep them away from creditors or remove them from bankruptcy.
Some people think they can protect property like homes, cars, jewelry and cash by giving it to a family member just before they file for bankruptcy. But, in fact, the bankruptcy trustee can recover these assets and you could be in trouble if the trustee determines that you intended to deceive him or your creditors. Transfers like this almost always backfire on you and for the relative or friend to whom you transferred property.
MISTAKE #5: Trying to hide your assets.
Some bankruptcy judges and trustees don't have a sense of humor. Don't assume you can get away with hiding prize collector cars or museum-quality oil paintings. The bankruptcy trustee may find out and you won't like what happens next.
MISTAKE #6: Withdrawing money from your retirement accounts to pay debts.
Many people use their retirement savings to pay off credit cards, medical bills, and other unsecured debt. This is a bad idea. If you qualify for bankruptcy, these debts can be reduced or erased completely. What's more, most pensions and retirement funds in qualified ERISA accounts are protected in bankruptcy. This means you may be able to erase your debts and keep your retirement account. Don't empty your retirement account in a futile attempt to catch up on bills.
MISTAKE #7: Filing bankruptcy when you expect a tax refund.
The amount of your exemption for tax refunds is limited. Talk with your bankruptcy lawyer to discuss how to handle your tax refund.
MISTAKE #8: Filing bankruptcy when someone owes you money.
If you file bankruptcy when someone owes you money, the trustee will simply collect that money and pay it to your creditors.
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"If you have questions about bankruptcy, foreclosure, credit card debt, loan modifications,
tax liens or other financial problems, please send your e-mail today to rich@chicagomoneylawyer.com or call 312-969-0730." – Rich