Quick Fix Debt Mistakes That Often Lead To Bankruptcy

Despite good intentions, some Richmond area bankruptcy clients in a bad debt situation often make matters worse by attempting a quick fix. Mistakes are easy to make when you’re in a stressful financial situation, and given the economy, there are a number of startup businesses designed specifically to prey upon those who are struggling financially. Before making these common mistakes, consider hiring a bankruptcy lawyer in richmond va with payment plans. A good bankruptcy attorney will want to make you aware of some of those unscrupulous business models that could end up worsening your financial situation. Before you try any “quick fix,” know that a richmond bankruptcy attorney is your safest bet to help you. 

Beware of: 

Payday loans. They are easy and convenient, and you don’t have to have perfect credit to get one; just a job or regular benefit payments. These services charge high interest rates, hundreds of times higher than any bank, despite state and federal legislation intended to curb these practices. For an average, two-week loan, you’re could pay an annual interest rate of 400 percent. People often  use them to cover every day expenses and they do so again and again until it becomes a vicious cycle of debt.

Buy-here and pay-here car lots. It’s one thing if it’s your local small car lot that you’ve known for years and years and has a good reputation in the community. But many dealerships like these take advantage of people with poor credit and not a lot of liquid cash. These places know you don’t have the credit to get a decent vehicle at a fair rate. So they raise the prices on high-mileage cars and then charge you ridiculous interest rates to borrow. You may face repossession after missing only  a single payment. A better option is to purchase from a private seller, if you can get enough cash together for basic transportation.

Not paying taxes. Even if you cannot pay your taxes, you need to file a return. The Internal Revenue Service will work with you on payment arrangements and you can make those arrangements yourself, over the phone. The IRS understands special circumstances, such as job loss and high medical bills. Not filing can cause the IRS to use harsh collection methods, including garnishing your wages, levies on your bank accounts and filing a federal lien against your property.

Siphoning retirement funds. Using your retirement funds to get out of debt is a bad idea because every $1,000 you take out, it could cost you an estimated $10,000 or more in lost future interest. That’s even before you pay the steep penalty tax for early withdrawals. The good news is, a Chapter 7 bankruptcy will keep your retirement funds protected and allow you to unburden yourself from the debt.

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