Foreclosure Prevention Toolkit

FDIC has published this online took kit to help homeowners prevent unnecessary foreclosures and stop foreclosure “rescue” scams that promise false hope to consumers at risk of losing their homes.

* Is Foreclosure Knocking at Your Door? This brochure explains how mortgage modification programs can help those at risk of foreclosure save their home.

* Beware of Foreclosure Rescue Scams. This brochure provides information on common scams, tips for detecting fraudulent deals, and resources for reporting criminal activity.

* The Your Own Home module of the FDIC’s Money Smart curriculum encourages homeowners to promptly seek help to avoid foreclosure and avoid scams.

Debt Settlement Company Files Bankruptcy, Leaves Consumers in the Lurch

The debt settlement company, Debt Relief USA of Addison, TX, which several of my clients have had the unfortunate experience of signing up with, filed for Chapter 11 bankruptcy relief today in Dallas with about $5 million in debts owed to thousands of consumer debtors it was supposed to be helping.  They took in payments from consumers and were supposed to be negotiating and settling debts.  The company was being investigated by the Federal Trade Commission and Attorneys General in several states.

This illustrates why the Kansas Legislature saw fit to outlaw debt settlement in Kansas except by licensed Kansas attorneys as part of their private law practice.  Debt settlement companies you find on the Internet or television advertising are not a viable alternative for resolving your financial problems.  Read good advice from my colleagues on the Bankruptcy Law Network, Wendell Sherk‘s “nine questions to ask a debt negotiator” and Steve Otto’s “billed as bankruptcy alternative, but are they really?”

Bankruptcy Without Attorney is Bad Idea

Think again before you decide to represent yourself in bankruptcy.  Bankruptcy is a technical area of law full of traps for the unwary.  As the old saying goes a person who represents himself has a fool for a client.

Seriously, many people who have attempted to represent themselves in bankruptcy have gotten themselves into big trouble, have lost property they didn’t have to lose, and have cost themselves more time and money than a bankruptcy attorney would have cost.

If you do file your own bankruptcy and mess it up, [Read more…]

7 Bankruptcy Mistakes to Avoid

The actions an individual takes leading up to filing bankruptcy can drastically affect his or her ability to get a “fresh start“. By avoiding these seven mistakes, one can travel successfully through the bankruptcy process without losing a pound of flesh.

Don’t use your credit cards once you have made your decision to file bankruptcy. Consumer debts incurred for luxury goods and services owed to a single creditor in excess of $500.00 within 90 days of filing are presumed to be non-dischargeable and may be found to be due and owing. Cash advances of more than $750.00 within 70 days of filing are presumed to be non-dischargeable and may be found to be due and owing. Don’t jeopardize your “fresh start” by running up your credit cards.

With regard to repaying debts, you cannot treat your family member any better than you would an ordinary creditor. In fact, a bankruptcy trustee can reclaim any amount repaid to a family member within one year of filing bankruptcy.


Can I Keep One Credit Card Out of My Bankruptcy?

Clients sometimes ask me if they can keep just one credit card out of the bankruptcy?  They want to omit it from the bankruptcy paperwork and keep paying the credit card payments after the bankruptcy filing so they can have one credit line.  Usually, this request is prompted by the fear of not having credit after the bankruptcy filing for emergencies.

Omitting a credit card account from the bankruptcy schedules generally BACKFIRES.  Most of the credit card lenders will FIND OUT out about the bankruptcy, even if the account is not listed, and CANCEL the credit line.  Lenders subscribe to electronic services such as Banko to tell them about all bankruptcies filed every day.

Many credit cards such as JC Penney and Dillards are actually the same creditor and notice to one account at GE Money Bank will result in cancellation of all accounts through that bank.  Often lenders run your name through the credit reporting agencies on a periodic basis.  The lender will FIND OUT, it is just a matter of when.

Once the lender finds out about your bankruptcy, the credit card account will be canceled, any post-bankruptcy payments will be forfeited, your account will be sent to collection for any post-bankruptcy charges and you will have negative post-bankruptcy credit history.

Omitting creditors from your bankruptcy schedules is wrong.  Intentially leaving off creditors in your bankruptcy case is fraud and a federal crime.  The discharge of debts is a reward for honest debtors who make full disclosure of their finances.  In addition to risking prosecution for perjury, you could be denied your discharge.

Can I list the credit card and keep it by reaffirming?  Generally, no.  Most creditors will not agree to a reaffirmation of unsecured debts and most bankruptcy judges will not approve such reaffirmations.  Your attorney is not likely to be willing to sign a required affidavit that reaffirmation of credit card debt is in your best interest.

Tax Refund in Bankruptcy

Cathy Moran on the Bankruptcy Soapbox reminds us of an important asset in bankruptcy:  tax refunds.

Your federal and state income tax refunds are property of the bankruptcy estate when you file bankruptcy in Kansas.  That is true for all refunds you are entitled to receive on the date your bankruptcy is filed, which includes the refunds for the year you filed that you will not receive until the following spring.

Example:  You file bankruptcy in January 2009.  The tax refunds for 2008 you will receive in 2009 belong to the bankruptcy trustee.  The trustee also will be entitled to a pro rata share of the 2009 refund you receive in 2010.

Kansas has no bankruptcy exemptions for tax refunds or earned income credits.  Some states do.

In chapter 13 bankruptcy, your tax refunds for years after you filed, we call post-petition years, are also property of the estate.

It is a federal crime to spend a tax refund that should be turned over to the bankruptcy trustee.  Your bankruptcy discharge can be denied.  It does not matter how much you need the money. The refunds will be sent to you and it is very tempting to keep the money.  Stop and call your lawyer to make sure you understand exactly what you are required to do with your tax refunds!

Free Web Videos on Filing Bankruptcy

Free web videos on about filing for bankruptcy are now available on the federal court website:

  1. Introduction
  2. Types of Bankruptcy
  3. Limits of Bankruptcy
  4. Filing for Bankruptcy
  5. Meeting of Creditors
  6. Bankruptcy Crimes
  7. Court Hearings
  8. The Discharge
  9. Legal Assistance