1.
Raiding your 401(k). Don’t think of retirement savings
as “now” money. It's money you’ve got to save for
later. “Some people use their IRAs, and
wind up in bankruptcy, anyway.” Even if you end
up having to use it post bankruptcy, it will go a lot further towards
survival of your
family after
bankruptcy; when you are buying necessities
with it instead of trying to keep
up with an impossible pile of
credit card
payments and other non-essentials that will
be discharged in bankruptcy.
2.
Debt-wipeout
scams.
Be careful when talking
with debt- consolidation firms. Many are shams. Be very,
very
cautious. For the most part,
stay
away. Many find themselves seriously behind
in payments that
were current when they first
approached this “solution”
to their debt loads. They make payments
religiously, believing they are working their
way out of overwhelming debt,
only to find that all of the payments
made were applied first
to the fees of those they hired to help get them out of debt. The wakeup call comes
when
one or more of their creditors sues for non-payment.
3.
Ignoring the card balance. Although credit card usage
dipped more than 13% in February, almost
15% of American
families still owe more than 40%
of their income, according to the Federal Reserve... “Ask yourself a question, ‘Do I really
need that?’, or more important,
‘Can I afford it?’”
In these days of lenders looking for any excuse to
raise
rates and add
fees
to your balance,
credit cards should be limited to convenience use only. If you can’t
pay
for the charge at the
end of the month in addition to the regular payment,
don’t incur the charge. If you are already overwhelmed,
see
a bankruptcy attorney A.S.A.P. You and your family will be glad you did.
4.
Walking out
on a mortgage. If you owe more than your
house is worth, walking away is not
your only option, but it may be your best
one. The first step is to look honestly at your finances and determine whether you face a short-term or a long-
term problem. If it’s long term,
then you can’t afford your home anymore. The faster you recognize it and
make plans to let it go, the better it will be. Lenders have shown
they
are little interested in modifying loan
payments
nor are they reducing the amount
owed in spite of all the so called consumer assistance plans that were supposed to
help homeowners. None the
less, if you just “walk away,” you
will find yourself facing more than just a
suit for foreclosure.
You need a plan
to get your name
off the title. All kinds of negative things
happen without this crucial element
taking place. A good bankruptcy attorney will
help you decide the
best ways to deal with this issue; some of which are the only way to
keep
your home and reduce the amount
owed.
5.
Co-signing
a loan. If a friend or relative asks you to co-sign
a loan, it means his credit is
so shaky no lender
will
give him money on his own merits. Why should you?
C-signing is
a business transaction, but people don't think of it as a business transaction.
They think, "I'm helping my friend out." Lenders
have no such illusions,
nor do those who make these kinds of loans concern themselves with
the
destructive impact they may
have on perfectly productive lives; family or
business relationships
don't matter in this element.
They will tell you that are just protecting their interest in that to which they are entitled. Yet
when junior lost the job he was
counting on to make that car
payment,
the lender had no problem dispossessing an unsuspecting mom from her
home to make up for the $3,500 deficiency on
the
car that the lender knew
the son couldn't pay for. Why did the
mom risk her home anyway? Because the nice man down
at the loan office assured her
it would never come to
that! The best way to help a friend or a
loved one where they need
money
or help with a loan is to
GIVE it to them
if you can afford it; or make sure the loan
payment
is enough to afford to pay yourself
in addition to all your
other bills. Otherwise,
let the lender take risks with HIS OWN money instead
of yours. THE BEST
ADVICE IS DON'T!
6.
Payday Loans. The Center For Responsible
Lending reports
that about 19 million Americans have resorted to these
high-interest loans,
although the number has
dropped in the past year.
They are marketed as short term cash advances
to meet emergency expenses
between paychecks. However,
consumers often become trapped
in repeat borrowing, according to the Consumer Federation
of America. For
the average two week payday loan,
the annualized interest rate can range to as much
as 391% to 521%, As
outlandish
as this seems, people turn
to new resources for lack
of other alternatives.
If people knew the reality of
how much these loans really cost and how they serve to keep the impoverished, they would RUN to bankruptcy court
to relieve themselves of
the debt load these loans end
up servicing.
In a word, the best way to use
these loans is DON'T!
SEE A BANKRUPTCY ATTORNEY INSTEAD.
7.
Reverse Mortgages. Older actors
pop up on television marketing these mortgages
as an
easy
income stream for seniors who are house rich and cash poor.
But the fees and
other costs associated with
reverse mortgages
can sometimes be considerably higher
than on other
loans. Other options:
Take out a home equity loan,
or sell
the home and move to a smaller, less expensive one. Or sell the
home to the kids and rent
it back. The kids get a good
investment property with
preferred tenants and a tax write off to
boot! Mom and Dad can have an
annuity for extra income and get to stay at
home. If there are debts problems, however, see a bankruptcy attorney before implementing
this strategy.
8.
Problems
with the IRS. If you look at
the small print when you
sign your
tax
return, you will see that basically you
are affirming that everything in it is accurate and true. What happens is you are audited
and everything is
not accurate?
If it's
a small amount, and they can
be
sure it's intentional,
then they could charge your client
with fraud, and there could
be penalties involved. If your
client
has a long standing problem, the issues can become
economically impossible to resolve. For
most cases, this means getting an experienced tax
attorney or CPA to help.
Sometimes, however,
if your client is
facing unfiled
returns or past due tax problems,
bankruptcy may provide
some relief, especially if
other debts have become
unmanageable as well.
Under certain circumstances,
some taxes can even
be discharged
in bankruptcy. Check with a bankruptcy attorney to
see
if there's a better way to handle
tax problems other
than the traditional payment
plan or offer in compromise.
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