Overwhelming debt is a problem that many people in Wisconsin, as well as in the rest of the country, have experienced. While some of those people have been able to recover, a large number of people are still dealing with the burden of debt. Those people should understand that despite the social stigma, about which many people are apprehensive, bankruptcy may just be the smartest way to obtain effective debt relief. However, it is sensible to consult an attorney before filing for bankruptcy.

If a person is dealing with a large amount of debt, the first thing to remember is that repaying the debt to certain creditors may not resolve the debt problem overall. For example, large repayments to a particular debtor or a relative or friend can lead to significant troubles in the long run, which are often called “preferential transfers” and may result in the other creditors filing a claim and taking away all of the money. Nonetheless, that does not mean that the person should ignore the utility bills and other regular obligations.

If a person is filing for bankruptcy, another point to keep in mind is to avoid the accumulation of new debt. A debtor should understand that accumulating new debt may lead to the new creditors getting the impression that the person who took out a loan or opened a new credit card did so with the intention of defaulting on payments. In fact, in certain situations, it may also be considered fraudulent.

Additionally, a person should keep in mind that when that person is deep in debt, making monetary transactions that are out of the ordinary scope of bill payments may create trouble even if those transactions are meant to safeguard assets from creditors. Keeping this in mind is especially important for those people who may want to transfer business assets with the intention of keeping them protected.

Source: The Huffington Post, “Here Is Exactly Why People Who File Bankruptcy Are Smart,” Steve Rhode, July 6, 2015