In a recent USA Today article by Christine Dugas, many points are made when filing for bankruptcy. While bankruptcy itself is not an inherently bad decision, it is not always the best one. This article gives some takeaway tips you can discuss with your family if you want to avoid bankruptcy. It can also help you decide if bankruptcy is right for you.
In the article, Dugas quotes Gerri Detweiler, a personal financier, on how you may not be able to afford bankruptcy. This is a common problem. While the filing fee of $335 for Chapter 7 and $274 for Chapter 13 may seem minor to some, to many that is money which might take months to collect.
The point addressed in the article is that if you lack the funds in such a way, you likely have little to no assets a creditor can take. Since bankruptcy lawyers are not free, you can use what's been called the "do nothing" approach. Though it rarely works, for some who have no assets to lose, it's an option. You have nothing they can take. You write the creditor a letter explaining you cannot repay the debt. And you ask them to stop collections against you. Sometimes it can be as simple as that.
But what if you own some assets and/or have a job? Dugas highlights how you should find out if your state has wage garnishments, and also to see your rights when it comes to your assets. If you have a job, creditors can try to get money from you by using a wage garnishment, though state laws differ on this. If you have a lot of assets, these can legally be taken and sold to pay off your debt. If either of these circumstances occur, you need to really consider bankruptcy. It may very well be your best option.
Whether you have decided to file bankruptcy or not, you should be aware many scam artists are out there looking to cash in on your mistakes. This occurs most commonly to home owners who are told they can save their home by paying the scam artist.
Foreclosure is of course a bad ending for your home. Once again, you may want to consider bankruptcy. It may very well be your best protection against losing your home.
Finally, the USA Today article makes another good point that should be addressed. Retirement money, 401Ks, and pensions should be off limits. The article does not take long in addressing this, so let's be clear. If you have to choose between spending retirement money or filing bankruptcy, the majority of the time you want to file bankruptcy. Using this money may only buy you a few months. If you're only buying time and not solving the problem, bankruptcy is a better choice.
There are both reasons to avoid bankruptcy and reasons to file. It's good to educate yourself on the laws, but it's okay to be somewhat confused on how it works. At the least, consult with a financial consultant if you feel your finances are out of your control. If you are considering bankruptcy, make the best choice and hire an experienced lawyer.