As long as the case is filed before the foreclosure sale takes place, the sale will be halted, and cannot be rescheduled without the permission of the bankruptcy court judge. The debtor will be given the opportunity to propose a Chapter 13 Plan to repay the delinquent mortgage payments and other debts over a three- to five-year period. If the plan is approved, the debtor will make monthly payments to the bankruptcy trustee, who will then distribute the payments among the debtor’s creditors. The homeowner must resume normal monthly payments on the mortgage after the bankruptcy is filed, in addition to making the trustee payments.

Among the other types of debts that can be paid through the Chapter 13 Plan are vehicle payments, furniture payments, taxes, and child support. The debtor’s unsecured debts (credit cards, medical bills, personal loans) may be paid nothing or may be paid some percentage of what is owed, depending upon the debtor’s income level and reasonable expenses.

If you have received a foreclosure notice and wish to save your home, it is important that you consult an attorney immediately. There are necessary steps that must be taken before a bankruptcy case can be filed, such as attendance at a credit counseling session, either online, by phone, or in person. There is also a great deal of paperwork that must be prepared before the case can be filed, and your attorney will be able to do a better job and get your case filed properly if there is sufficient time to do so before the date of the sale.

Recently, I was watching the “Today” show and heard that an upcoming segment would address bankruptcy. I looked forward to hearing what Carmen Wong-Ulrich, a financial reporter for CNBC, had to say. I was deeply disappointed to hear her say that in a Chapter 7 case, “you lose all of your assets.” That is completely incorrect, yet millions of Americans now believe what this “expert” said on national television.

However, there is some good, accurate information available, and I recently found an excellent article on the U.S. News and World Report website. The author, Kimberly Palmer, interviewed several bankruptcy attorneys, and in particular quoted Carey Ebert, president of the National Association of Consumer Bankruptcy Attorneys, who is a bankruptcy attorney and Chapter 7 trustee in Hurst, Texas. Those attorneys offered the following tips:

1.  Take a close look at your budget. Consumers are required to take a credit counseling class before filing a bankruptcy case, in order to give them a chance to consider other ways to resolve their debt. A bankruptcy attorney can give you the names of credit counseling organizations that are approved by the bankruptcy courts in case you decide to file a bankruptcy case afterward. If you take such a course from an unapproved agency, you will have to take the course again from an approved company before filing bankruptcy.

2.  Prioritize your payments. Pay for your important assets first, such as your house and cars. Credit card payments should come last, after your home, vehicles, food, utilities, and other necessities. If you are unable to buy groceries, gasoline, clothing, and other necessities, but are still making your credit card payments, you should seriously consider speaking to a bankruptcy attorney.

3.  Exhaust your other options. Some people are able to negotiate alternate payment plans with their creditors or obtain loan modifications. However, most people who enter into even reputable debt payment plans are not able to complete the programs, and end up back where they started, sometimes after paying thousands of dollars. Often, a bankruptcy case will cost much less than the amount of money spent on a failed attempt to complete such a program.

4.  Consider your credit score. Most people who are considering bankruptcy already have troubled credit reports, and wiping the slate clean enables many people to recover and begin improving their credit after the bankruptcy case is concluded. A bankruptcy case does stay on your credit report for 10 years, but has less effect as time goes by. If a debtor continues to make on-time mortgage and car payments during and after the bankruptcy, their credit score will improve quickly.

5.  If it’s the right decision, don’t wait. Once you consider your other options and decide bankruptcy may be the best decision for you, there is no reason to wait. Continuing to make payments to creditors is usually a waste of money if you have decided to file a bankruptcy case.

6.  Get professional help. Bankruptcy attorneys usually offer free initial consultations and arrange for payment plans. And bankruptcy attorneys know how to protect your assets and avoid unnecessary loss of your property. Often, people do such things as use up their retirement funds or transfer property in the mistaken belief that they would otherwise lose those assets in bankruptcy. It is much better to learn the facts before making any bad decisions.

7.  Stay away from scams. Ads in newspapers, on the radio and TV, and on the internet that promise to cut your debt without bankruptcy are often scams. Normally, the companies charge up-front fees, and then require large monthly payments to build up a fund to use for settlement with creditors. During that time, creditors continue to add interest and late fees, and the balances on the accounts grow to a point where settlement is impossible. By the time the debtor realizes that, the settlement companies have already received their fees, while the debtor is left with the same or higher debts than before.

8.  Keep your car and house after filing. In most cases, debtors are able to keep their homes and cars after filing bankruptcy, along with most or all of their other assets. Often, adjustments can be made to interest rates on vehicles, and in a Chapter 13 case, affordable monthly payments can be made to catch up on past-due mortgage and vehicle payments.

9.  “Hang in there”. Bankruptcy is not a simple process, but with the assistance of a good lawyer, most people find they are much happier after filing bankruptcy than they were before. Protection from creditor harassment and the opportunity to get a fresh start enable you to provide a solid financial foundation for your family.

The companies that promise to clean up credit reports for a fee cannot deliver an improved credit report using the tactics they promote, and in fact, it is illegal. No one can remove accurate negative information from your credit report. If you see a credit repair offer, this is how to tell if the company behind it is up to no good:

–          The company wants you to pay for credit repair services before any services are provided. Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the promised services.

–          The company doesn’t tell you your rights or what you can do for yourself for free.

–          The company recommends that you do not contact any of the three major national credit reporting companies directly.

–          The company tells you they can get rid of most or all the negative credit information in your credit report, even if that information is accurate and current.

–          The company suggests that you invent a “new” credit identity, and thereby a new credit report, by applying for an Employer Identification Number to use instead of your Social Security Number.

–          The company advises you to dispute all the information in your credit report, regardless of its accuracy or timeliness.

If you follow illegal advice or commit fraud, you may find yourself in legal hot water. It is a federal crime to lie on a loan or credit application, to misrepresent your Social Security Number, or to obtain an Employer Identification Number from the IRS under false pretenses. You could be charged and prosecuted for mail or wire fraud if you use the mail, telephone, or internet to apply for credit and provide false information.

To learn how to improve your creditworthiness and find legitimate resources for low or no-cost help, see “Credit Repair: How to Help Yourself” at www.ftc.gov/credit. To obtain free credit reports, visit www.annualcreditreport.com. You are entitled to one free credit report per year from each of the three major credit reporting agencies, and this is the only website that provides access to those reports at no cost.

The Bankruptcy Code provides for you to keep your home, cars, furniture, appliances, retirement plans, and other essentials that you need to get a fresh start. Although it is true that there are limits to the values of what you can keep in bankruptcy, those limits are very generous, and most people are not required to give up anything. In general, fears of losing property in bankruptcy are overblown by the credit industry.

SECRET NO. 2: YOU DON’T NEED TO BE BROKE TO FILE FOR BANKRUPTCY

You can be employed, have a bank account, and own property up to certain limits as of the date your bankruptcy case is filed. Once your case is filed, you can acquire any new property you want, and no one – the courts, the trustee, or your creditors – can touch it. Special rules do, however, affect inheritance rights and a limited number of other “windfall” acquisitions, such as winning the lottery, within the six months after your case is filed.

SECRET NO. 3: THERE IS NO MINIMUM AMOUNT OF DEBT REQUIRED FOR BANKRUPTCY

Bankruptcy is designed for people who are unable to repay their existing debts, and there is no requirement that you owe a certain amount before you can declare bankruptcy. The ability to file bankruptcy is based on the amount of your debt compared to your income. Many people file for bankruptcy who owe relatively little money, and many people who owe a great deal of money do not have the need to file for bankruptcy.

SECRET NO. 4: A BANKRUPTCY FILING IS NOT “THE KISS OF DEATH” TO YOUR CREDIT RATING

While we hope you will not go into bankruptcy with the intent of getting back into debt, the negative impact of bankruptcy on credit is extremely exaggerated. After you receive your bankruptcy discharge, it won’t be long before you begin receiving credit card offers again. However, these early offers are usually at very high interest rates, and should be avoided. Once you have put together a savings plan and have started to build your “cash cushion,” you will be able to begin thinking about new credit. If you have kept your home, car, or other collateral and have continued to make prompt payments during and after the bankruptcy, your credit score will gradually improve. After about two years post-bankruptcy, you will be able to obtain reasonable interest rates on mortgage, vehicle, and credit card debt. The bankruptcy case will remain on your credit report for 10 years after the filing date, but will have less and less impact on your credit score as the years go by.

SECRET NO. 5: YOUR BANKRUPTCY CASE WILL NOT BECOME PUBLIC KNOWLEDGE

Bankruptcy filings are not reported in the newspaper or otherwise revealed to the public. While it is true that a bankruptcy case is filed in federal court and is of public record, it is extremely unlikely that anyone you know will go to the courthouse and find out that you have filed a case. You should be aware, however, that if you file a Chapter 13 bankruptcy case, the trustee may require that your payments to the trustee be made through payroll deductions. In that case, the payroll department of your employer would be informed that you are involved in a Chapter 13 bankruptcy case.

SECRET NO. 6: YOUR SPOUSE MAY NOT HAVE TO FILE FOR BANKRUPTCY WITH YOU

It is not uncommon for one spouse to be able to file a bankruptcy case, and allow the other spouse to remain outside the case. Each couple’s situation must be fully evaluated before such a determination is made, but every effort will be made to allow only one spouse to declare bankruptcy.

SECRET NO. 7: YOU ARE NOT ALONE

Every person going through bankruptcy feels alone. Nothing could be further from the truth. Over 1,000,000 Americans filed for bankruptcy in 2008, and the rate continues to climb sharply. You undoubtedly know people who have filed for bankruptcy, although they may not have shared that information with you. The many famous individuals and companies who have filed for bankruptcy include:

President Abraham Lincoln
Author Mark Twain
Automobile Manufacturer Henry Ford
Hall of Fame Quarterback Johnny Unitas
Hollywood Director Francis Ford Coppola
Television Personality Larry King
Actor Mickey Rooney
Actor Burt Reynolds
Actress Kim Bassinger
Entertainer Jerry Lee Lewis
Entertainer Wayne Newton
Entertainer Toni Braxton
Continental Airlines
United Airlines
US Airways (twice)

There is absolutely no reason to feel guilty about filing bankruptcy, especially if you use it as an opportunity to provide future financial happiness and security for your family. All of these people went bankrupt, yet all of them went on to achieve success in their fields. So remember that while your financial problems are serious, they aren’t the end of the world. Declaring bankruptcy is often the beginning of your new world of financial freedom.

SECRET NO. 8: KRAFT & ASSOCIATES IS HERE TO HELP YOU

Kathleen Munden, the lawyer who manages the Consumer Protection Department at Kraft & Associates, has over 13 years of experience in providing individuals with bankruptcy assistance. We offer a free, no obligation consultation with Ms. Munden, to discuss your individual financial circumstances and develop a plan to solve your financial issues. Ms. Munden will continue to work closely with you, and you will not be passed along to a paralegal or assistant after your first consultation, as is common with some high-volume bankruptcy firms. Kraft & Associates can help you get the “Fresh Start” that you deserve. Call Ms. Munden at (214) 999-9999 or (817) 999-9999, or you can e-mail her at kmunden@kraftlaw.com to arrange for your free consultation.

1. Do Not Use Your Retirement, Savings, or Home Equity to Pay Credit Card Bills

Many people do not realize that their retirement accounts, savings accounts, and home equity are usually safe from creditors, both inside and outside bankruptcy. Before using up those assets to pay unsecured debts, such as credit cards, medical bills, signature loans, and other debts, you should consult with an attorney and get advice about your options. Once those assets are gone, it is very difficult to rebuild them, and too often, people end up filing bankruptcy only after they have used up all of their assets in a futile attempt to keep their heads above water.

2. Make a List of What You Owe and Compare it to Your Income

Often, people are afraid to learn the truth about their own financial condition, and have only a vague idea of how much they actually owe their creditors. Add up the balances on your credit cards and other bills, and draw up a budget based upon your current income. You may find that your attempts to repay your debts are unrealistic, and that bankruptcy or some other option may be the only way for you to ever get out from under the burden of debt and rebuild your financial security.

3. Recognize the Danger Signs

If you are making only your minimum credit card payments, using your credit cards to buy necessities such as groceries and gasoline, and are unable to handle even the most minor emergencies, you should consider getting some advice about your options. Getting caught in the endless cycle of making minimum payments and then charging your credit cards up to the limit again each month just to stay afloat is a dead-end street. You are paying sometimes as much as 35% interest just to use your own money to buy the things you and your family need to survive.

4. Stop Paying Debts that can be Discharged in Bankruptcy

Credit card debt is almost always dischargeable in bankruptcy. Even if you make enough money to pay back some portion or all of your credit card debt in a bankruptcy case, the repayment will be at 0% interest. The money you are using to pay those creditors could be much better used to pay off such things as car notes and other secured debts, and to get caught up on the things that your family needs.

5. Stop Using Credit

If you are considering bankruptcy, you must also stop using your credit cards and not incur any other debt. In particular, it is very unwise to take out cash advances, charge your credit cards up to the limit, or buy anything unusually expensive with your credit cards before filing bankruptcy. Some of those actions could be considered fraudulent, and you might have to repay all or some of those amounts, which would make filing a bankruptcy case much less helpful to you.

6. Don’t Give Away Money, Property or Assets

People often consider transferring property to a family member, paying back a “loan” to a friend or family member, or otherwise attempting to conceal or safeguard assets before filing bankruptcy. Usually, those things are unnecessary, since most people can keep all of their property when they file a bankruptcy case. Such actions may be considered fraudulent and create problems that would otherwise not have existed. You should always consult with your lawyer before transferring or giving away property if you are considering bankruptcy.

7. Pull Your Credit Reports

Whether you decide to file a bankruptcy case or not, it is a good idea to pull each of your credit reports every year and see if there is any indication of fraudulent activity or inaccuracy on your reports. You are entitled to one free credit report each year from each of the three credit reporting agencies. The Web site for the free reports is AnnualCreditReport.com. There are other credit report sites that are heavily advertised but are not free, and charge fees for credit monitoring, credit scores, and other unnecessary services. If you consult with a lawyer regarding a bankruptcy, you will need to provide your credit reports so that none of your creditors is excluded from your case, and it would be helpful to have that information at the time of your first consultation with a lawyer.

8. File Your Tax Returns

If you have not filed tax returns that have become due, you must do so before you can file a bankruptcy case. You will have to provide your last two tax returns to the bankruptcy trustee once your case is filed, and the IRS is informed of every bankruptcy filing. If there are tax years for which you have not filed returns, the IRS will file a claim in your case and possibly assess much more in taxes than you actually owe. It is best to file your own return so any amounts due will be as accurate as possible.

9. Consult With an Experienced Bankruptcy Attorney

Bankruptcy is a very complex area of the law, and you should find a lawyer who is experienced and well-versed in that field. Be sure that your case will be handled personally by a lawyer from start to finish. Many of the large bankruptcy “mills” will assign your case to a paralegal, and there will be very little involvement by an attorney unless a problem arises. If a lawyer is handling your case from the beginning, any potential problems can usually be taken care of before they become real problems.

10. Tell Your Lawyer Everything

For example, if you have a piece of real estate or other property that you don’t want to lose, the best way to protect it is to tell your lawyer about it. Your lawyer will be able to advise you about how to protect your property, but only if he or she knows all the facts. When your case is filed, it will be assigned to a trustee. The trustee’s job is to make sure that everyone plays by the rules, and he or she will often consult county and state records to determine if a debtor owns real estate, vehicles, or other property that is not listed by the debtor in the paperwork filed with the court. Bankruptcy cases are filed in federal court, under penalty of perjury, and bankruptcy fraud is punishable by large fines and imprisonment for terms up to 20 years. It is not worth the risk to try and conceal property from your lawyer or the trustee, so tell your lawyer everything so you can be protected and receive the benefit of your bankruptcy discharge.