Foreclosure Blunder #3: "The sure-fire quick fix is..."

BLUNDER #3: Thinking, “I’ll just file for a Chapter 13 Bankruptcy. That will erase my bad debt and solve the problem once and for all”.

It’s absolutely correct that a Chapter 13 Bankruptcy will temporarily stall the foreclosure proceedings. However, THIS IS ONLY A TEMPORARY SOLUTION.

Many debtors facing foreclosure literally bet the farm and spend their last cent to have an attorney file bankruptcy. Imagine the shock of realizing you’re still going to lose your home anyway.

Important Note: We are NOT attorneys and we are not giving legal advice. But we’ve seen this happen time and time again. You can literally pay out thousands of dollars to an attorney, and still end up with nothing.

You have to ask yourself, is it worth the last few thousand dollars you may have to your name? The average attorney fee for filing bankruptcy as a home owner is at least $2,500, paid in advance. Federal law requires you to pay for a class on bankruptcy before you are allowed to file bankruptcy.

Yes, the Federal courts will protect you temporarily from your creditors. But the fact remains you must still establish a payment plan for your home that includes the back payments, attorney fees, sheriff’s office fees, and any other fees the lender may have stacked on.

Plus, on October 17, 2005, Congress passed the toughest new laws governing bankruptcy since 1975. It is now more difficult to simply “file for bankruptcy”, and according to CNN, attorney fees are expected to skyrocket!

For example, there are new requirements requiring you to obtain credit counseling (... and it’s not free. YOU must pay for it!). Your attorney must document every aspect of your finances, driving legal costs up even higher. In fact, many attorneys are now jumping ship on representing the “average person” in bankruptcy proceedings, due to the soaring costs of time and effort.

If you cannot afford a much higher monthly payment on your home, you might want to reconsider plunging headfirst into bankruptcy. Remember, your bankruptcy will be a matter of public record for ten years. It’s well worth thinking very seriously about this choice if at all possible.