Some people who are dealing with debt problems cannot fathom the possibility of seeking bankruptcy protection. They may believe that bankruptcy is only for cheats, deadbeats and financial failures; and since they do not fit into those categories, bankruptcy is not an option. While this notion may be noble, it may lead to terrible financial decisions when it comes to paying down debts.
This post will focus on what not to do in order to pay off debt.
Using your protected retirement funds – If a creditor wants to know you have a retirement fund or a 401(k) that you can use to pay off debt, don’t even think about using them. While this is not legal advice, there is no legal requirement to use these funds, and there are so many bad things that can come from using these funds to bail yourself out. So don’t even entertain the possibility of using retirement funds to get out of debt.
Paying credit cards before mortgages –Paying down smaller debts before tackling larger ones this is the right approach to paying down debt, but you should not sacrifice mortgage payments in the face of credit card obligations.
Ignoring tax debt – You may have heard about the power of the federal government and dismissed at being a myth (like the boogeyman or bigfoot). You should know that the IRS has the power to levy bank accounts and place liens on property. Suffice it to say, make your tax debt a priority.
If you have additional questions about bankruptcy and when it is appropriate, an experienced attorney can advise you.