Bankruptcy Attorney Says You Should Never Do These 3 Things

As Americans face significant debt and an uncertain economic future, a bankruptcy attorney has revealed the three things you should never do.

Today, total household debt in America skyrockets into more than 17 trillion. And the average American holds $101,915 in debt, according to Experian.

With a mix of student loan, mortgage, medical, car and credit card debt ramping up for many Americans, bankruptcy is not always as far-fetched reality as many believe. Since the end of the pandemic, bankruptcy filings soared by nearly 20 percent, according to Debt.org.

Adrienne Hines, Ohio-based bankruptcy lawyer and TikToker who runs @theladylikelawyer, helping others find debt relief, shared in a recent video the three things she would never do.

Not all of them are strategies followed by most Americans. Many parents decide to cosign on rents or other payment plans for their children or other family members without the credit to do so, but, according to Hines, this can be the beginning of your financial undoing.

“I would never cosign on a debt, not for my child, not for my best friend, not for my sister, unless I was already willing and able to take on the payments at any time for any reason,” Hines said.

Another absolute no-no is borrowing money from your primary bank, she said.

“I would never borrow money from the bank that I bank at.”

Often, banks will use this against you to lock you out of your account or freeze your funds, Hines said.

And last but not least, Hines said if her personal debt exceeds what she’d get in a tax refund, she would take the tax refund, file for bankruptcy and get rid of all her debt.

“This is the single best piece of advice I’ve learned in my 26 years of practice,” she said in the video.

The reason for this strategy is because the refunds for taxes you paid on income before filing for bankruptcy become part of your bankruptcy estate. So if you receive the refund and spend it on your expenses before filing, it won’t actually become part of the ‘bankruptcy estate.’

Never Avoid Debt

Bankruptcy lawyers have seen their fair share of economic turmoil from clients, but a large contributor to many bankruptcy cases is just how bad people can let their debt get.

“Many borrowers make the mistake of ignoring their debts when repayment plans and subsidies exist that could help their situation,” Michael Lux, student loan expert and founder of the Student Loan Sherpa, told Newsweek.

While millions of federal student loan borrowers qualify for $0 per month payments and subsidies that cover student loan interest, for example, choosing this option can be a dangerous game, he said.

“Ignoring the debt means extra interest charges, late fees, and credit consequences,” Lux said. “Ignoring your financial problems almost always makes things worse.”

Americans should also be aware that they can address their student loans during the bankruptcy process. Historically, discharging student debt was nearly impossible in bankruptcy, but that is no longer the case, he said.

According to Scott Smith, another debt attorney based in Louisiana, there’s another way you can reduce chances of finding yourself in bankruptcy, although it might be more difficult to control.

“Never get divorced,” Smith told Newsweek. “This is probably the most destructive financial decision anybody could make. Divorce leads to more bankruptcies (and bankruptcies lead to more divorces) than anything else.”

But it’s not just your relationship with your significant other that can wreak financial havoc. Our perspective on employment also carries a strong impact.

Smith said all too often Americans find themselves in a difficult position financially after relying on a single source of income, then having it all taken away from them.

“Staking your entire financial future on the whims of a faceless, potentially heartless corporate employer is nuts,” Smith said, adding he recommends Americans start a side hustle they can grow into a full-fledged business.