Are You Robbing Your Future To Pay Debt?
Most of the mistakes that debtors make in their bankruptcy are made well before they ever consider bankruptcy as an option. This is what happens - a debtor falls on hard times, they get scared, they get mad and they vow to pay back every last dime they owe anyone, no matter what it takes.
The debtor then begins to work a second job which they eventually discover is not only NOT helping their financial situation, but it is making it worse because they have to:
- Pay to commute to the second job.
- Pay for child care so they can go to the second job.
- Pay taxes on the little amount of money they earn working the second job leaving them in a financial hole.
And after they finally give up on the idea of taking a second job they begin to look to their future income as a way to solve their financial problems and this is where the trouble really begins.
Below are two future robbing tricks that you should avoid even if you're not considering bankruptcy--yet:
Taking Out a Loan to Pay Back Debt
Sounds silly? Well it's a common practice amongst those who are drowning in debt who don't earn enough income to repay their debt and who don't want to file bankruptcy. They take out the loan because they figure that it will tide them over while they find a better paying job or some miracle takes place that will help them pay their bills. But it never happens, these people end up filing bankruptcy anyway and sometimes they are unable to discharge some of that new debt because it was accrued right before they filed bankruptcy.
Liquidate Retirement Account to Pay Debts
But the terrible part about this future robbing trick is that sometimes debtors liquidate their retirement account and use some of the money to repay personal loans given to them by friends and family. Then they file bankruptcy after the money runs out and they realize they have no other choice. That's where the trouble begins. You see, as long as your retirement money is in your retirement account, creditors cannot access it. Once you take it out of your retirement account, it is fair game. The bankruptcy trustee will see that you gave this money to your family and friends and will demand that THEY return it. That's right - even if they no longer have the money the bankruptcy court will demand that it is returned and handed over to your creditors. So not only will you no longer have retirement savings but your friends and family will be in hot water if they cannot repay the money to the bankruptcy court.