DON’T do any of the following until you speak to an experienced bankruptcy attorney:

1. Home Equity Loan- Taking out a Home Equity Loan to pay your creditors is one of the most damaging mistakes people can make when trying to avoid bankruptcy. In Texas, your home, and equity in your home, is exempt in bankruptcy. This means your home, or the equity in your home, cannot be taken away from you in bankruptcy in order to pay your unsecured creditors. It is EXEMPT. However, if you fail to pay your mortgage, your home CAN be foreclosed on and taken away from you by your mortgage company.

I’ve seen, on too many occasions, people that took out a home equity loan, used the proceeds to pay unsecured debts (credit cards, medical bills, etc), fell behind on their home equity loan, and then lost their home due to foreclosure. Whereas, had that same individual filed bankruptcy in the first place, they would have eliminated their unsecured debts while keeping their home.

2. 401K Loan - Like your home, money in a retirement account, like a 401k, is exempt in bankruptcy and cannot be taken away from you in order to pay your creditors. However, it can be taken away from you if you take out a loan against it and fail to repay it. Why not keep your retirement money and simply eliminate your unsecured debts by filing bankruptcy.