Whether the situation already feels hopeless or the writing is on the wall, these four things may further delay your ability to file a bankruptcy, or alter the type of bankruptcy you may be eligible to file.

STOP! Four Mistakes to Avoid Before Filing Bankruptcy

Whether the situation already feels hopeless or the writing is on the wall, these four things may further delay your ability to file a bankruptcy, or alter the type of bankruptcy you may be eligible to file.

  1. Don’t cash out your retirement – It seems tempting to take money from that account. After all, you’ve earned it. But keep in mind there are usually tax penalties for withdrawing funds early. That $15,000.00 you take out and spend today is worth substantially more if you had left the funds in place for your retirement age, when working that second job, or overtime, or even working at all, is no longer physically possible. Save that money for retirement!
  2. Don’t take out the second mortgage/equity line of credit – While many people may not be able to borrow due to their credit rating, if it’s still an option for you, the only thing you have accomplished is taking on debt that is not dischargeable (or forgivable) in a Chapter 7 bankruptcy. While it may seem like a good idea to use that money to pay off your credit cards and other debt, you have now traded one payment for another and placed your home at risk should you not be able to make that second mortgage payment.
  3. Don’t repay friends or family money you borrowed – While some of us don’t have the good fortune to be able to borrow from friends or family, many of us have and do. While we all feel an obligation to make sure the good friend or family member who helped us out in a bind is repaid, repaying that family or friend within a year of filing your bankruptcy case will likely result in the bankruptcy court asking that friend or family member to hand those funds over to the court. This is certainly not the result you, or your family, bargained on!
  4. Don’t take cash advances on credit cards – Using that cash advance feature of one card to pay the next and then flipping it around again is not uncommon when you are struggling financially. Robbing Peter to pay Paul, as the phrase goes. Don’t! Taking large cash withdrawals or advances from a credit card prior to filing bankruptcy can delay if and when you are able to file a bankruptcy case; it may even mean some of your credit card debt is not dischargeable!

In short, before making one of these 4 mistakes, schedule a free consultation with an attorney from our office to discuss your options. Each situation is unique and the answer for your situation will not be the same as the answer for someone else. It is our pleasure to meet with you individually to tailor a specific plan to meet your needs.