While there are a few downsides, filing bankruptcy can be a breath of fresh air to offer debtors the restart they need to return to financial stability. Though it’s often frowned upon, filing for bankruptcy can help you receive a fresh start. When the debt gets to be too much, and you’re out of options, a Memphis, TN consumer bankruptcy lawyer can help you navigate the process of filing for bankruptcy. Keep reading to learn more about what you need to know to avoid making the most common mistakes many make before declaring bankruptcy.
Repaying Loved Ones Right Before Filing for Bankruptcy
One of the most common mistakes people make when filing for bankruptcy is trying to minimize the damage by paying back their friends and family before filing bankruptcy. Though you may have loyalty to these individuals, you should avoid making payments to these people before declaring bankruptcy. If you’ve made a payment within one year before filing to “insiders” or those you have a relationship with, this can be recovered by a Chapter 7 trustee.
This is because this money could’ve been used to pay back preferential creditors, but those funds are now unavailable. Your friends and family cannot have any preferential treatment over other creditors.
Using Your Retirement Accounts
Your retirement accounts are exempt from being used to repay credits. This is because they cannot be easily liquidated like other assets, such as a car or property to pay back debtors. However, some are desperate and make the uninformed decision to cash out their retirement accounts.
Generally, your retirement accounts are only subject to be taken if you have a QDRO, unpaid income tax, or criminal fines. This means you should avoid using your protected finances to pay for debts related to your bankruptcy, as it can take away from your protected funds, adding additional financial stress.
Forgetting to Hire an Attorney to Help
Finally, the worst mistake anyone can make when filing for bankruptcy is failing to retain the assistance of an attorney. Unfortunately, this can be a complicated process, and one that can be challenging to navigate if you do not have a lawyer on your side. Without an attorney, you may find yourself losing even more funds because you are much more likely to make the aforementioned mistakes.
However, discussing the details of your case with an attorney can help ensure you have the best chance to navigate this process as simple as possible.
When you are in need of an attorney to help you through the bankruptcy process, the Arnold Law Firm can help. Our dedicated legal team has the experience necessary to help you. Contact us today to learn more about how we can assist you.