Every day millions of hard-working people face sudden life changes that affect their finances. Many situations, such as job losses, are temporary and have no long-term impact on debt repayment. Ideally, debtors catch up on payments, maintain their credit scores, and remain financially stable.

But others may not have a quick or easy answer to their financial problems. In these cases, debtors often consider Credit card bankruptcy to resolve money issues, and, for many people, it is the best option. However, before taking this important step, it is good to take a few tips from legal professionals.

  1. Talk to a Bankruptcy Attorney Immediately

People with a lot of debt often try to solve their problems independently and only talk to attorneys as a last resort. However, the sooner debtors speak with legal professionals about their situation, the more likely they are to find a satisfactory solution. Those who get legal advice immediately are typically in the best shape later on.

  1. Avoid Using Retirement Funds

Using money in a retirement fund to pay outstanding bills seems like a logical choice, especially when savings are viewed as a “rainy day fund.” Since the Covid-19 Pandemic, savers can withdraw as much as $100,000 without penalties, and account owners have three years to pay the taxes on funds.

However, it can be difficult to pay the funds back, which means less money at retirement. But retirement funds are protected from creditors, so it is wise to leave them safe and protected in a retirement account. The money will not be touched in the event of bankruptcy.

  1. Do Not Sell Possessions Before Filing for Bankruptcy

Selling valuable belongings to pay down debts seems logical and can be very tempting. But anyone who is considering bankruptcy should speak with a lawyer before selling anything. After bankruptcy, clients might still need to sell belongings to pay for expenses such as rent, and many will be able to hold onto their things.

  1. Do Not Accumulate Cash

It is always good to have a cash buffer, which provides a sense of security during uncertain times. But, be aware that creditors can seize cash, so those thinking about bankruptcy should put cash into an investment such as a Roth IRA. An attorney can help clients determine where to place cash and protect it from creditors.

  1. Consider Forbearance Options

Lenders may offer forbearance options that allow customers to skip payments. It pays to research every account and determine available options. If this temporary assistance doesn’t resolve financial issues and bankruptcy becomes the best choice, these debts are erased in a Chapter 7 bankruptcy. The money that is saved during a forbearance can be helpful later for paying everyday expenses and attorney fees.

When a sudden change in circumstances makes it difficult to pay bills, bankruptcy may be the best answer. Anyone who is considering this step should immediately speak with a bankruptcy attorney. It is best to avoid raiding retirement funds, selling possessions, or accumulating a lot of cash during this period. Debtors should also look into any forbearance programs creditors offer since the programs allow debtors to skip payments and save money.