December 14, 2020

Should You Consider Bankruptcy? Five Things You Should (or Shouldn’t) Do!

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Have you lost your job? Have your hours been drastically cut at work? Do you own a business that is struggling to make ends meet? Then you may be like so many others in this especially difficult time who can find relief via bankruptcy.

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Maybe you thought about filing bankruptcy before the COVID-19 pandemic, or perhaps you are just thinking about it now. In any case, there are five things you need to do, or not do, in order to get you back in the driver’s seat to securing your future, your home, and the personal property you own.

1. Seek Expert Bankruptcy Advice Immediately

Even if you are only contemplating bankruptcy as an option at this stage, the first thing you should do is schedule an appointment to speak with a bankruptcy attorney. There are many websites out there that will try to convince you that you can work things out on your own. Some sites will try to discourage bankruptcy by suggesting that credit counseling or debt settlement are more attractive options. However, in most situations, bankruptcy works better and returns the person to a favorable credit standing faster than any other options.

A free consultation with a bankruptcy attorney can help you wade through the flood of information on the internet and help you create a tailor-made plan for your situation.

2. Leave Your Retirement Account Alone!

Even during a pandemic, the act of taking money from your retirement account to pay bills should only be taken as a last resort.

Although the CARES Act temporarily allows eligible individuals impacted by COVID-19 to withdraw up to $100,000 from certain retirement accounts without the usual penalties and withholding, eventually you will pay tax on any pre-tax income you receive. The CARES Act provides flexible repayment options, consisting of either (1) paying those taxes over a 3-year period, or (2) redepositing the money into a retirement account over a 3-year period to postpone owing tax until you take another distribution.1 However, if you are in financial difficulty now this withdrawal may cause more harm than good—and you should carefully consider the likelihood that you will be able to actually pay back taxes or redepositing the funds within the 3-year period.

Remember, retirement funds are one hundred percent (100%) shielded from creditors, so it is not really the best source of funding for debt that can be eliminated in a bankruptcy case.2

3. Avoid Growing Your Bank Accounts

Third, do not let money pile up in your bank accounts. You may not have been spending much money since the COVID-19 pandemic started because of the limited events, dining options, etc., during stay at home orders.

Significantly, you are only able to exempt so much of your cash in a bank account in the bankruptcy case. If you are saving this cash, you may use it to retain your attorney a few months before filing your case. This payment is a valid use of your funds and part of every pre-bankruptcy plan. Your bankruptcy attorney will have other ideas for where to place extra funds outside of a bank account.

4. Don’t Sell Your Personal Property

Fourth, your personal property does not need to be sold to pay bills, nor should it be given away. The value of this property is important and can be protected in a bankruptcy case. You do not have to lose everything to file for your fresh start in bankruptcy.

A conversation with a seasoned bankruptcy attorney will cover how you can properly keep your belongings and avoid the disfavored practices of hiding or gifting the property.  

5. Take Advantage of Forbearance Opportunities

Finally, the pandemic has prompted many lenders to offer forbearance options. This may mean, for example, that a credit card company allows you to miss some payments because of the current world situation. Even your mortgage companies or car loan lenders may offer forbearances of some sort; if they make sense, then you should take them. An experienced bankruptcy attorney will be able to advise you on this, as well.


In the end, experienced bankruptcy counsel can save you time and unnecessary frustration by working out the best plan to exit your current financial distress. It’s a free consultation—what do you have to lose?

If you have questions or concerns about bankruptcy, contact us at (410) 862-2890 or fill out our online form.


  1. And the option of re-depositing the withdraw money, may mean that you need to file an amended tax return to retrieve any tax paid before redepositing.
  2. Maryland Annotated Code, Cts. & Jud. Proc. §11-504(h)
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