Things to avoid if you are considering bankruptcy.
- Never take money out of retirement accounts. Retirement savings should not be touched for any reason. These accounts are completely protected and exempt in bankrutpcy. If you are thinking about taking money out of these accounts to make it through the month, it is time to give me a call. Not only will you have to repay the amount you take out, but there are huge tax penalties on top of that. Don't touch them - call us first. 707-545-8700.
- Don't start moving assets around. Bankruptcy trustees have broad powers to investigate your recent financial dealings to see if there is anything suspicious. If you paid off a family member, or business creditor, or if you are attempting to hide assets by giving them to friends and family, they will find it. And if they do find any suspicious activity, you may end up being charged with fraud and dealing with the department of justice or the FBI. Most assets are exempt, and you can save them through bankruptcy, so you have nothing to hide. But moving a car or a bank account to a friend or relative will get you into serious legal trouble. It's just not worth it.
- Don't take cash advances on credit cards or run up credit card balances. Racking up even more credit card debt while you are approaching bankruptcy can put you in an even more difficult situation. If you are considering bankruptcy, the credit card companies will accuse you of fraud by saying that you knew you were going to file, and that it is fraud because you had no intention of repaying the debt. Stop using the cards now.
- Do NOT take out payday loans.
If you cannot keep up with your bills, you may end up seeking a short-term solution. You may think "If I can just make ends meet this month then maybe next month I will be able to catch up." In rare instances, this is possible, but for most people, the more loans you take out, the harder it is to get out of debt.
My experience with these firms are that they are simply legal loan sharks, and bottom-feeding bloodsuckers. And that is my polite opinion.
They also have outrageous interest rates which can be up to 1000%. That will only make your debt problems worse.
- Avoid debt consolidation agencies - they are scams.
There are many firms who will graciously offer to "consolidate" your credit card debts by negotiating with your creditors, getting a reduction in the amount, and then reduce it all to one monthly payment. Sounds great, but that's not what they really do. Instead, say you owe $20,000 in credit card debt and the "consolidation firm" calls up the creditors and gets them to charge off $10,000, and you make a monthly payment of $500 for 20 months, and the problem is solved.
What they really do is negotiate the debt down to $5000, you pay $10,000, and they pocket the extra $5000.
Even worse, debt consolidation will not repair your credit since the the "consolidation" is actually a default on the account, and that will show up on your credit report, making things worse, not better. Avoid these scammers at all costs. Call my office before you even think of calling these crooks.
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