Bankruptcy: Is That My Only Option or Are There Bankruptcy Alternatives?
Bankruptcy isn’t always the best answer in a financial crisis. When filing for bankruptcy, it could be necessary to risk non-exempt assets, certain debts may not be eligible for discharge, and in some cases individuals or couples may not even be eligible to file for bankruptcy.
To ensure that bankruptcy is the best option for you, consider a few other steps that can be taken first. Some people can solve their problem by selling valuable assets. Some common items that can be resold for substantial funds include: cars, jewelry, watches, etc. The money gained from the sale of valuable items/assets can then be used to simply pay off your debts or drastically decrease the amount of debt hanging over your head. Paying off a substantial portion of the debt could alleviate the financial pressure enough until you discover a more long-term solution to the financial crisis.
Another option is to approach family members who might be willing to help you escape the mounting debt that led you to consider seeking a discharge of debt through bankruptcy. On the other hand, some feel bankruptcy is a better option than involving family members. If you qualify for bankruptcy and you prefer not to approach family for financial help, you can go straight to an experienced southern California bankruptcy attorney to pinpoint your next move.
There are other options that many individuals and couples overwhelmed by debt often see as solutions, but that will actually exacerbate the problem in the long run. For instance, it’s not a good idea to transfer credit card debt to a lower interest rate credit card. It is a particularly bad idea if you are opening up the lower rate card in order to transfer the debt. It may seem to solve the problem, but it’s a temporary fix. The credit card companies will not let go of the debt easily if you file for bankruptcy after you transfer a large debt to a new card that was offered with a lower rate.
Some consider refinancing their home if they own a property that has equity. You could be eligible for a home equity line of credit. If you do choose to take a home equity loan in order to pay off higher interest debt, be completely positive before you do so that you can actually afford the payments that will come with the new loan. If you can’t, you have now risked your home in order to pay off what was previously unsecured debt. Before you pull equity out of your house to pay off creditors of unsecured debt, consider very carefully the potential consequences this action.
Another option that you should use caution considering is tapping into your retirement plan. It’s almost always a bad idea. Pension plans are typically safe from the bankruptcy process. You could file for bankruptcy and keep your pension/retirement money safe so you’ll have it when you retire as planned. If you choose to borrow against your retirement funds or retirement investments and then end up filing for bankruptcy anyway, you’ll find that your creditors can seize those funds during the bankruptcy process. (Most will find that tax penalties will be incurred for the “early distribution” as well).
If you have questions regarding whether bankruptcy or one of the popular alternatives to bankruptcy is the best solution for your situation, contact Westgate Law, your southern California bankruptcy law experts.