Common mistakes a debtor makes before bankruptcy

Debtor makes before bankruptcy

1. Using funds from your 401(k) or IRA to clear debts. Retirement reserve funds are entirely secured in insolvency. Try not to make early withdrawals, or take a loan contrary to your retirement scheme.
2. Paying unsecured arrears like credit cards, medical expenses, as well as individual loans rather than secured debts such as car loans and mortgages. Secured lenders can acquire your property without a court order. However, unsecured lender must file a lawsuit that remains in bankruptcy.
3. Not comprehending the “setoff” concept. Banks are authorized to apply the money in your account counter to any outstanding loan from the same bank. When you start a bankruptcy application, create an account with a bank which you have zero debts, then transfer your money from the credit union or old bank to the newly opened account.
4. Risking your home to clear credit cards. Debts, including credit cards’ can be dismissed in insolvency; one can lose his home for not paying the mortgage. Be warned of ads which advocates for debts and home equity loan consolidation.
5. Not paying income taxes. New tax bills cannot be discharged in bankruptcy. Moreover, IRS has exceptional collection powers as well as both penalties and interests quickly escalate the tax debt. Withhold the suitable amount from your salary to keep your taxes current.

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