Handling Your Bills in an Emergency
When something like what we are all experiencing comes along, the first instinct many people have is to draw down their 401K and IRA accounts to keep bills current. In a situation where the disturbance is short lived, everything gets back to normal and the downturn is individual (that just affects one family) this can make sense. However, in a situation where there are likely to be long term effects, like a general recession, giving away your protected, exempt from creditors, retirement savings is the last thing you should do.
So too, taking out a second mortgage, thereby selling your exempt equity in your homestead to a bank, to ease cash flow on a temporary basis may just mean that your resulting mortgage becomes even less affordable once you get through the temporary emergency.
Many creditors, credit cards, mortgage companies, loan servicers, are working with consumers to defer payments and forgive interest. Working with your creditors in this way is the best short term solution, and a much better one than giving up the equity that NO CREDITOR can take from you.
Moreover, since credit ratings are, essentially, comparative, and just a way for creditors to measure risk, in an environment where everyone is feeling the pinch, the comparative impact is lessened by the fact that everyone is affected. Conserve your cash and your equity. Chapters 13, and 11 of the Bankruptcy will help you pick up the pieces later without having to lose your hard earned equity in the process.
This article is written by an attorney at Attorney Donald Wyatt PC. Always consult an attorney before making any legal decisions. To make an appointment today, please click here to contact us.