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What are some dos and don’ts of bankruptcy?

On Behalf of | Dec 8, 2022 | Bankruptcy |

Although many New Jersey residents are financially responsible, anyone could fall into debt. Unexpected circumstances can arise that warrant filing for bankruptcy. In that situation, it’s crucial to know some dos and don’ts of bankruptcy.

Dos of bankruptcy

Do make every effort to try to satisfy your debt by other means. For example, many creditors are willing to work with consumers by accepting a debt management plan so they can recover some of what’s owed. They often agree to forgive interest and late fees so they can be paid back.

Do continue making payments on vehicles and other property you still owe and that you want to keep. It can help you hold onto those items after you have filed for Chapter 7 bankruptcy.

Do make efforts to improve your credit after filing for bankruptcy. It’s normal for your credit score to nosedive, but you can be smart and apply for a secured credit card that runs on a deposit of your own cash. Over time, you might be able to increase your credit limit and switch to an unsecured card.

Don’ts of bankruptcy

Don’t borrow from mortgage or retirement accounts to pay off unsecured debt. Using funds from the former could end up working against you and might even cost you your home. Borrowing from the latter can deplete the amount of money you’ll have in the future.

Don’t talk to creditors after filing for bankruptcy. The automatic stay protects you against collection efforts. If they continue contacting you, they’re breaking the law.

Don’t deliberately max out your credit card before filing for bankruptcy. It could result in a bad faith filing and the judge could dismiss your case.

Bankruptcy is a big step if you’re heavily in debt, but it shouldn’t be taken lightly.