Although declaring bankruptcy is a regular experience for many Americans, this does not mean that it should be done so carelessly or as a way to avoid paying off debt. The outcome of your bankruptcy case will significantly affect your future, particularly your credit score. Your bankruptcy may continue to appear on your credit record for up to ten years, and if you apply for a high-paying job or a pricey insurance policy, the credit bureaus may potentially keep mentioning your bankruptcy for much longer.
Although bankruptcy has drawbacks, it also offers major advantages to people who are mired in a hopeless cycle of debt. It is possible to gain from bankruptcy if you properly prepare for it and take advantage of all of its advantages. You can do this with the aid of your bankruptcy attorney.
The following dos and don’ts for people who feel bankruptcy may be in their future should be known before you speak with a bankruptcy attorney. You can contact Law Offices of Terrence Fantauzzi at (909) 552-1238 right away to get a consultation with a bankruptcy attorney who can help you.
The Dos of Bankruptcy
Check and Recheck Your Debts: For many Americans, medical costs are the main cause of severely heavy debt. Research has revealed that medical bills frequently contain mistakes, which only makes issues worse.
Insurance payments may not be accurately recorded by the medical provider, and procedures may be improperly coded or inputted multiple times. It is therefore crucial that you thoroughly review your medical debts and immediately challenge any charges that are in error. The same is true of all of your loans; check your credit report right away.
Investigate Your Refinancing Options: Interest rates are on the rise in an effort to curb inflation. However, if you have a higher interest rate loan, it is still possible that there is an option out there with a lower interest rate. It is worth looking into to find out what your options are.
Create a Budget: You must create a budget that takes into account all of your payments and living expenditures in order to determine whether you have any chance of ever getting out of debt with your current income and interest rates. After that, you must adhere to that spending plan.
The Don’ts of Bankruptcy
Don’t Borrow from Your 401(k): Borrowing against one’s retirement is a common error people make when attempting to avoid bankruptcy. This is particularly troubling when it comes to tax-advantaged accounts like 401Ks. You will be liable to taxes and penalties if you don’t pay back your 401K loan, which will make you wish you had simply gone right through with declaring bankruptcy.
Don’t Pay Off Creditors One at a Time: While paying off your highest interest loans first can be a sensible plan for achieving financial independence, be careful to avoid doing this too soon before your bankruptcy filing. The bankruptcy trustee may take back any money you appear to have given a creditor in preference to another too soon after filing for bankruptcy and distribute it to your other creditors. If the return was given to a person, such as a family member, rather than an institutional lender, bankruptcy trustees are more inclined to assume unfair preference.
If you have questions or are ready to learn more about your specific options, we invite you to contact Law Offices of Terrence Fantauzzi at (909) 552-1238.