COVID-19 Forcing You Into Bankruptcy? How to Avoid Costly Mistakes

If you're like most people, you've encountered financial difficulties during the current pandemic. If that's the case, you might be considering bankruptcy. If you are, you want to make sure that you avoid mistakes that could cause problems for you down the road. Before you make mistakes, here are some tips that will help you through the financial struggles you're facing as a result of Covid-19.

Consider Alternative Payment Options

If the current pandemic has you facing financial difficulties, the first thing you want to do is consider alternative payment options. Many companies are allowing individuals to postpone payments for a month or two. Others are allowing individuals to renegotiate their payment arrangements, often resulting in smaller payments. Before you file for bankruptcy protection, see if you can take advantage of alternative payment options. 

Keep Your Retirement Accounts Secure

You might have heard that the government is allowing individuals to withdraw money from their retirement accounts. In the past, you'd need to pay a penalty for early withdrawal, but that's not the case during the current pandemic. That might seem like a good idea, but that might not be the case.

First, you're taking money from your retirement account, which will reduce the amount of money you have when you retire. Second, if you plan to use the money for a debt, you could have the debt forgiven through bankruptcy. Finally, there might not be early withdrawal penalties, but the money you withdraw may be taxable, which adds up to another debt. Safeguard your retirement accounts. Don't withdraw funds to pay off debt. 

Safeguard Your Usable Cash Funds

If you're currently saving money in your bank account to pay off debts, you'll want to make sure that you safeguard that money as well. You might not realize this, but while you're saving money to pay off a debt, another creditor could attach your bank account and seize the funds. Unfortunately, that can leave you without the money you need for other bills. The best way to avoid having your savings seized is to avoid placing it in a bank account. Instead, place the money in a secured short-term investment account. That way, your money is earning interest, and creditors can't seize it to pay off a debt. 

Consult With a Bankruptcy Attorney

If you find yourself without any viable options to get yourself out of a Covid-19 financial crisis, contact services like Martinez Law Firm as soon as possible. An attorney can answer any questions you have about the process. They can also provide you with advice regarding the bankruptcy options that are available to you.