When is Bankruptcy a Bad Idea?
Bankruptcy is a very useful tool for many individuals, particularly for those with a large amount of unsecured debt, such as credit cards and personal loans. However, depending on your situation, sometimes filing for bankruptcy can potentially do more harm than good.
Since bankruptcy is supposed to help, how can this be? This article outlines a few scenarios where bankruptcy can potentially be a bad idea. Sometimes it may not be advantageous to file at all, other times it may be wise to wait for a period of time to make sure certain details do not count against you based on the law.
A few common issues that can pose a problem to a bankruptcy filing include:
There are many exceptions in Arkansas bankruptcy laws which allow for you to keep certain assets during a bankruptcy, such as a pension, some types of real property, and some types of life insurance policies. However, many big-ticket assets are not protected, such as vehicles, boats, trailers, and second homes. If you would like to keep your property, you need to make sure you make this clear to your bankruptcy attorney.
Payments on Debts
This may sound strange, but how you pay off your debts before you file bankruptcy is an important consideration. Since in a Chapter 7 filing your assets will be sold and the money distributed evenly to your creditors, paying off substantially more debt to one creditor could be shown as preference. For example, if you pay a family member back for a loan up to a year before filing but neglect paying on your credit card debt, a court can order those payments to your family be taken back and redistributed evenly. Be careful you don’t cause your loved ones unwarranted headaches!
If you incurred debt due to some kind of fraudulent activity, those debts will not be able to be forgiven through bankruptcy. This situation will require the skill and attention of an experienced bankruptcy attorney.
If you have more questions about bankruptcy in Arkansas, contact one of the attorneys at The Brad Hendricks Law Firm. We will help guide you through the entire process and make sure you get the best possible arrangement to get your financial life back on track.