A lot of people are faced with the decision to declare bankruptcy. When debt gets uncontrollable and you are not meeting monthly payments, it may be time to consider this option. Bankruptcy comes with consequences and your credit will be affected for years to come, but it will help you wipe out the debt you cannot handle and you are able to start fresh and begin slowly rebuilding your credit rating. If you believe bankruptcy may be the best option for you, you should speak with an expert as soon as you can. They will be able to advise you on what and what not to do, and hopefully they will be upfront with you about what is in your financial future should you make this decision. There are a number of things you should avoid in the weeks and months prior to declaring. If you have a FHA home loan or you are considering FHA Refinance {it is important to speak with a bankruptcy advisor before filing any applications|let your bankruptcy attorney knows these things.
Another thing you should avoid when considering bankruptcy is paying off your car loan. You may think it is a great idea to take money out of a savings account and pay the car off because that will be one less bill you need to worry about. You may also assume the court will see that you have made a responsible action and look kindly on you once you have placed your bankruptcy filing. However, if you own your car, it means you will have a lot of equity in it. While the amount differs from state to state, there will more than likely only be a small portion of this protected under bankruptcy laws. This means payment on a several thousand loan means, you may only be entitled to keep $1,000 if the courts force the sale. Your creditors have access to the rest of the sale amount. However, if the loan is not paid off, there is no equity and if sold, the profit would all be owed to the bank. This makes a creditor unlikely to pursue the sale of the vehicle.
Another action you should avoid when considering bankruptcy is paying down debt with retirement savings. It may seem like a good idea, especially if you are young, to to use this money for your bills. Unfortunately, by removing this money early you will owe a fee on it. You will also now need to pay income tax on the amount. If there is not enough left to eliminate your debt, it will continue to grow. You, are essentially the same position as before liquidating your retirement except now you have no protection in your financial future. If you are in a desperate financial situation, contact a professional for advice as soon as possible.