If you’ve told your friends or family members that you’re considering bankruptcy, you might have gotten some pretty negative feedback. They, along with professionals like credit counselors or financial advisors, might be telling you that bankruptcy should only be used as a very last resort. But can bankruptcy sometimes be the right strategy?
One thing you need to remember is that bankruptcy can provide protection for important assets like your home and pension plans. It seems that many people feel obligated to do every single thing they can in order to pay their debts and avoid bankruptcy. Unfortunately, this may include putting your house on the line and even using retirement funds to pay off your financial obligations.
For example, many families use a home equity loan to pay off credit card debt. The loan may be pretty big, even in the tens of thousands. The sad thing is that by taking a home equity loan you will actually be using up your precious equity when you really didn’t have to. If you take out a $40,000 home equity loan in order to pay for credit card debt, you will still have to pay back the loan to the bank. If you don’t, your house is on the line.
If you had filed for bankruptcy protection, your home would most likely have been protected under your state’s homestead exemption. For example, some states like Florida have an unlimited exemption, which means that your primary home is protected no matter how much the house is worth or how much debt you have.
Likewise, many families dip into their pension plans unnecessarily (or even empty them completely) in order to pay for their credit card debt or other unsecured debts. The fact that they are unsecured means that there is no collateral to be taken. However, you have just used up valuable resources that would have most likely been protected under Chapter 7 or Chapter 13 bankruptcy.
Now we’re not saying that bankruptcy is a walk in the park, or that you should take your financial obligations lightly and avoid paying them simply because you don’t feel like it. However, sometimes bankruptcy, even with its long-term ramifications, should be considered earlier than you think in order to protect your most valuable assets.
For more information please visit: http://www.floridalawattorney.com