A Cautionary Tale
While there are both state and federal laws to protect you from creditors, laws are also in place to protect creditors and allow them the opportunity to collect. You can use this double-edged sword to your advantage with the help of a skilled attorney.
After helping thousands eliminate their debt and having many conversations with other attorneys, accountants, and financial advisors, here are some tips to help you avoid some of the pitfalls that can jeopardize your case.
- DO NOT borrow from friends or family or take out loans or balance transfers to repay your debt. Borrowing from friends or family will never end well and will cause long-lasting fights. More importantly, borrowing more to repay will not solve anything. At the end of the day you still have debt that must be repaid. You are borrowing from Peter to pay Paul — and Peter charges interest too!
- DO NOT transfer assets out of your name in fear of lawsuits. While you may think that creditors cannot go after your assets if you take them out of your name, there are laws in place to allow them to reach for recently transferred assets if it’s clear that they were transferred for less than fair market value.
- DO NOT be quick to liquidate retirement accounts to pay your debt. You’ve been saving for years so you can retire. That income will support you for the rest of your life. A good financial advisor will stress the importance of saving and investing for your retirement. In addition, there may be significant tax consequences if you pull money out of a retirement account. Consult with an experienced attorney to see what options are available before taking a step that can hurt you now and in the future.
- Be careful about paying back friends or family ahead of your other creditors. While we cautioned earlier not to borrow from friends or family, you may be reading this too late. We all want to maintain good relationships with our friends and family and want to pay them before some big bank. The problem that may arise is that friends and family are creditors just as much as your credit cards and medical bills. Paying one ahead of another can cause you, your friends, and your family quite a headache.
- DO NOT choose an attorney based on location. In real estate you will always hear “location, location, location”. But it doesn’t always apply. If you had a serious medical condition, would you go to the doctor five minutes away because he or she is close or would you travel a bit further for someone who is more experienced and has a better reputation? The same is true with something as important as protecting your assets and eliminating your debt. A good attorney can also minimize your office visits and do a lot virtually if you are comfortable with it. This should be one of the biggest takeaways from the pandemic.
- DO listen to your attorney. You are paying your attorney good money, so you should take the time to listen to them as they are trying to guide you and help get you through this financial hardship. Your attorney is on your team and you share a common goal. If you do not follow your attorney’s advice, you risk complications to your case that even the greatest attorney may not be able to fix. If something is unclear or you are not sure about an aspect of your case, please ask first before you act.
Zimmelman Law is happy to speak with you about your legal needs regarding your financial future. Contact Z Law to set up a free consultation today.
