If you're in trouble financially and considering a bankruptcy filing, know that you have many more alternatives to bankruptcy available to you. While some of them you may have heard about, there's one option in particular that sometimes sounds controversial or unworkable at the outset. However, it's one that can potentially keep your debts under control without ever needing to file for bankruptcy.
Some Creative Methods to Avoiding Bankruptcy
While it may make you feel guilty taking the advice to borrow money from a family member or friend, you don't have to be burdened with that kind of financial move. Bankruptcy should always be a final resort anyway, and if you have particular financial resources, you could possibly tap those in safe ways. Before you do, though, it's a good idea to study your personal budget and see how many things you can eliminate in your life that you don't need.
You also have the standard procedures of debt consolidation services, payment plans on your credit cards, or refinancing options for your mortgage or car. But did you know that you can also borrow money off your IRA or 401K? Before you consider this route, study how much you have in those accounts in comparison to the debt you have. If you have more in your savings, this type of loan might be a good option.
Don't forget to consult with a financial expert first to talk about what the IRS rules are behind borrowing off your savings.
If your debt is directly related to credit, you also have a creative option of transferring your credit card balance to a lower or zero interest account. Keep in mind, though, that a pristine payment record is required before transferals can be allowed. Also prepare to pay a transfer fee.
In the long run, a balance transfer could save you money and perhaps take you out of debt to avoid bankruptcy.
Being Judgment Proof
This term might sound intimidating, especially with the word "judgment" in the title. Ultimately, you might be a candidate for being judgment proof if you have debts and can prove you have no major assets that could be sold off. In fact, if you can prove that you won't have any major assets for the foreseeable future, you can potentially have debts and never have to do anything to pay them back.
The reason this works is because federal and state laws protect any money you have that provides for a basic living, particularly money from the government. Creditors might still try to sue you, even though they can't legally take away protected money that would create a financial hardship if not available.
Overall, if you plan to live the rest of your life simply and without major assets, your debts will be removed eventually through state statutes of limitation. And you'll never have legal issues because you can't be thrown in jail for having debt.
Even so, this and the other options may still not be feasible if you have many assets and a complicated financial life. If you live in Southern California and you feel bankruptcy is your final option, contact the Law Offices of James C. Shields. With law offices throughout the Southern California region, we deal in not only bankruptcy but also estate planning and probate.