This is somewhat of a continuation from my previous article. I respectfully request you read it to bring you up to speed. Either way I hope both articles sheds some light on a dark situation. So if you’re facing financial hard times through credit card debt, loss of work, or possible foreclosure, here’s some thing to consider doing. Before I start let me say that I’m not a attorney, mortgage broker or financial planner. This article is written only as a non professional opinion gathered from books, friends in these professions and experience. What you the reader do is entirely up to you and leaves me the author in no way shape or form liable for anything the reader does or doesn’t do. Ok now that we’re past my disclaimer we can begin. Everyone’s situation is unique and different, so that being said I’m going to go over this with a broad stroke. It’s up to you to figure out what’s best for your specific situation. If you’re like the majority of the country and living beyond your means then here’s an option. This is a last resort after everything else you’ve tried has failed.
First, get as many credit cards or lines of credit as you can within a month. I know, I know it sounds crazy just humor me and keep reading.Then start getting cash advances (the more time you spread out in between taking the money out the better, ideally around 6 months and never max out any card, to suspicious) the idea is to slowly come close to maxing out all the cards overtime. Save the cash in a safe place (not a bank!) a loved one or under your mattress. Don’t blow the cash!!!! Save as much as you can. Try to cut back on your bills, key word being SACRIFICE. Do you really need every cable channel? Cut down on your utility bills by monitoring the lights, AC, and outlets more closely. Replace your air filters this will result in savings (buy the cheap green ones from Wal-Mart for more air flow which equals savings). Don’t eat out as much and watch your spending habits. What you’re doing isn’t working, so change it.
Second, if you own your house (you’ve tried to refinance to no avail and your out of options) stop making payments. Or if you’re married or have someone you really trust, short sell the house to them and continue living in the house with a much cheaper mortgage. Enjoy not being upside down in your home. (Short sell defined in my previous article). This is the best option if the house is only in your name or you have some one not on the loan who you trust and you can short sell the house to. If that doesn’t work for your situation, then stop making payments and start saving that money, and again not in a bank. Keep paying your utilities and enjoy the free rent. It will take at least 5 months to kick you out so again save cash and plan ahead for what’s coming. I’ve seen some foreclosures take 18 months before they kick the individual out. It all depends on how busy the banks are.
Third, if you’re making car payments and want to keep the car continue to make the payments. However keep this in mind, all this is in preparation for a bankruptcy and as a general rule of thumb you don’t want more than $5,000 worth of equity in you car. Meaning the car could be worth $15,000 however if you’re making payments and you have only paid $5,000 or less than your cars safe. If you own your car it needs to be worth $5,000 or less. If not sell it and make payments on a car just remember to have no more than $5,000 of actual money in the car. Any more than $5,000 in your car could result in collectors making you sell the car to pay them and leaving you with only a few dollars to buy a much cheaper car. Also if you are going to buy a car be sure to do it before you damage your credit score through your credit cards and or not paying your mortgage.
Fourth, Hide your assets, collectors can come after life insurance policies if there’s a cash value, savings accounts, if you own other properties outright ect. Most states IRA’S and mutual funds are safe. Talk in detail with a bankruptcy attorney about all your assets and liabilities. You should be able to find one that will give you a free initial consultation. Take advantage and have questions ready for him. Do this early in the game so you can plan and act accordingly.
The key to all of this is, planning and to have the mind set that once the bankruptcy takes place they will examine your bank accounts, earnings, debt to income ratio, ect. You want nothing to appear suspicious like withdrawing $2,000 every week for 4 months. You want things to appear like you have a spending problem, or gambling addict, or simply just don’t make enough money to pay for every thing. Now days after a bankruptcy you can start rebuilding your credit almost immediately. You should be able to get a new credit card in about two weeks and in about two years you can buy a house again. Big improvement from seven years which was the average time it would take prior to the recession. So it’s not a big deal these days. In closing, cash is king and stay liquid. Again I’m simply sharing ideas through this article and cannot be held accountable for anyone’s individual actions. Good luck and research everything, knowledge is power.