Sunday, September 8, 2013

Bankruptcy Reality Check: "Too Broke to File for Bankruptcy"

At almost every initial free consultation bankruptcy meeting, with a prospective client, the question arises, “if I’m broke, how am I supposed to pay for the bankruptcy”?

Many consumers worry about paying for bankruptcy, thinking they may never be able to afford it. If you are thinking of resolving your debts by filing bankruptcy, time may be on your side. You may be able to stop making payments on some, or maybe even all of your current debt. Freeing up of that income may then be used to pay your bankruptcy fees. In fact, many people pay for bankruptcy by doing just that.  Every situation is different, so you need the advice of an experienced Utah bankruptcy attorney to determine which creditors you may stop paying, and when.

Borrowing from a credit card or any other institutional lender, is not an option that an attorney can recommend as a solution for paying your bankruptcy fees. Generally, a decision to take money out of retirement accounts (whether IRA or 401k), may not be a wise choice. To file bankruptcy and pay in this manner could be a last resort, realizing that it may have unintended tax or retirement consequences.

Getting help from your family members, however, may be appropriate, as long as you are honest about why you need the money. Only you can determine whether your relationship is strong enough, but if you have sympathetic family members or close friends, then this may be a good option for you.

The easiest time of year and one of the easiest ways to pay for bankruptcy is with your tax refund. This is especially true if you are accustomed to using your tax refund to catch up on all the bills that have gotten behind over the past year. If you are living in that kind of yearly pattern, you probably need to consider bankruptcy.

Speak with an experienced Utah bankruptcy attorney about your individual financial situation. You may find that you can use your tax refund or other potential options along with the advice of an experienced bankruptcy attorney to get a fresh start.