What Not To Do Before Bankruptcy

This year, 1.5 million people will file for bankruptcy. This is a serious situation that leads to major financial ramifications for several years. Therefore, there are a number of steps one should take in order to avoid these drastic financial steps. If you feel that you are falling behind financially, there are some important actions that you should avoid. These “financial traps’ could end up causing your more financial trouble that could lead to bankruptcy.

Here’s a look at what you should not do before bankruptcy. 

Rolling Unsecured Debt into a Mortgage or other type of Secured Loan

If you have unsecured debt, make sure you keep it that way. Too many people who end up in bankruptcy roll their unsecured debt into a mortgage or other secured loan. The problem is that if you fail to service a secured loan, you can lose the collateral. In many cases, people end up losing their homes because they are used as collateral on unsecured debt. Remember that the roof over your head is not just an asset, it is where you and your family live. Avoid using your primary residence as collateral at all costs. 

Borrowing Money from Your Retirement

It may be tempting to reach into your retirement to pay off your loan. However, you have to consider the long-term damage that you can be doing to your financial security. For instance, if your retirement funds are in a 401K or IRA, then you will have to pay a penalty for withdrawing those funds. Also, be aware that your retirement is designed to provide you with an income when you can no longer work. When you borrow money from retirement, you can be compromising your financial stability when you are no longer able to generate an income through labor. 

Borrowing Money from Friends and Family 

We all have that one relative or friend that is always hitting up everyone for cash. You don’t want to become that person. At all costs, you should avoid using your friends or family as a loan officer. This can not only strain relationships, but it can also lead to legal trouble if you can not pay back the loan. 

Speculating in the Financial Markets 

When people get desperate, they may tend to look for easy answers. Sometimes these “easy financial answers” are sought through dangerous speculation in the stock, options, forex, or crypto markets. Most people lose all of their money when they speculate in the markets, don’t throw away what little resources you may have. 

Taking Cash Advances 

Finally, avoid going to the cash advance stores to pay your bills. These cash advance companies can charge as much as 278.10% per year! That means that if you borrow $1,000, then you will end up having to pay back the company $2,781.00 in interest on top of the $1,000 you borrowed from them. 

Making the Right Choices to Avoid Bankruptcy

Now you know what not to do before a bankruptcy. If you want to want to make the right choices, be sure to talk to an attorney or debt counselor to learn your best plan of action. By making smart choices, you can avoid financial traps that can hurt your future. 

Are You Considering Bankruptcy?

Acclaim Legal Services offer free in-office or phone consultations to review your personal circumstances, analyze your situation and advise you on the best course of action.

We specialize in bankruptcy law, debt resolution, foreclosure prevention and credit repair. We have offices in Detroit, Southfield, Dearborn, Flint, Ann Arbor, Lansing and Warren, Michigan. Please call us toll free at 866-261-8282 or click here to schedule a consultation right now.