Here are some helpful tips that could help you avoid making common mistakes while trying to reduce your debt.

1) STAY FOCUSED. Focus on one debt or one type of debt at a time. If you try to reduce all of your debt at once it can be overwhelming and very discouraging. You’ll be more successful if you focus on one debt or one type of debt at a time. Once you’ve eliminated the first one, you can move on to #2, etc…. Of course, you’ll have to pay the minimums on the others as you pay down each priority, but this strategy will work better than trying to pay a dollar or two more than the minimums on every creditor.

2) DON’T CANCEL CARDS WITH BALANCES. Obviously when you are trying to pay down debt, don’t use your credit cards. However, you should wait to cancel cards until after you’ve paid them off. You’ll want to take this approach because if you close the account while there is still a balance, this removes leverage with the credit card company. You will no longer be a customer so they will no longer have any incentive to make your life easier. Of course, they have little incentive even if you’re a customer, but they will have absolutely no incentive if you close your account.

3) HAVE REALISTIC EXPECTATIONS. Don’t try to build your debt reduction plan around unrealistic expectations. You’ll just get frustrated and give up. If you’ve never tried to live on a budget, don’t expect that you’re going to be perfect in the first month or two. Changing behaviors is a process that rarely happens overnight.

4) ESTABLISH AN EMERGENCY FUND. As difficult as it may seem, you must make an emergency fund a priority. It can be small, $1000 for instance. But, it’s very important there be one. When you are trying to get out of debt you may be tempted to empty out all savings accounts and apply the money toward your debt. Avoid this temptation. You want to maintain an emergency fund in order to pay for unexpected expenses. Without the emergency fund, you end up borrowing to pay these expenses and you’ll find yourself going backward. You may have to delay your debt reduction plan and only pay minimums for a few months while you rebuild the emergency fund, but it’s important to build and maintain this fund.

5) STICK TO YOUR PLAN. Don’t let other people dissuade you from your plan. There are different plans. Some people like to pay off their lowest balance cards first, then work their way from the lowest to the highest balances. Some people prefer to adopt a strategy where they pay the highest interest rate debt first and work their way down to the lowest interest rate. Whatever the strategy you decide works best for you, stick to it! You know yourself better than anyone else. Of course, listening to financial advisors and gathering information is smart, but you have to be true to yourself and you have to apply the advice that you know you can use. Reread #3!

6) RESTRICT ACCESS TO YOUR CHECKING AND SAVINGS ACCOUNT. Don’t be tempted to give your bank account information to a credit card company to automatically debit payments. You can certainly use your bank’s online banking system to pay bills, or you can send a check, but you would be well advised not to set up automatic payments with the credit card companies.

7) DON’T BE TEMPTED BY A SECOND MORTGAGE OR HOME EQUITY LINE OF CREDIT. Remember, a good debt reduction plan requires changing your behavior. Using a second mortage or HELOC to pay off credit card debts doesn’t help give you discipline to change your behavior. Usually what happens is that you end up with more mortgage debt AND new credit card debt. Why risk your house to pay credit card debts?

8) AVOID MAJOR PURCHASES. Try not to make any major purchases while you are trying to get out of debt. This may seem like common sense, but reminders don’t hurt. Sure, you may be forced into a major purchase if the washing machine dies, or the fence falls over. But, don’t be tempted after paying off goal #1 and goal #2 and start seeing some light at the end of the tunnel to run out and buy that new television you’ve been eyeing. Wait until you’ve completed your debt reduction plan first! Think of it as being a reward at the end of the process. You may even decide you don’t need or want that television after all once you’re done with your debt reduction plan.

9) DON’T ARGUE ABOUT MONEY WITH LOVED ONES. Again, reread #3. Maybe your spouse won’t be as disciplined about the plan as you. But, you shouldn’t criticize purchases your spouse makes because you wouldn’t have made the same purchases. It’s more important for each of you to love and support each other, not fight with each other.

10) NEVER THINK YOU ARE STUCK. I often hear people who think they can’t do anything about changing their jobs, their health, their financial situations, or their futures. But, you can. It’s up to you. If you want a better life, you have to choose a better life and choose to do things to make your life better. If you start feeling frustrated or hopeless, wake up! There is a better life out there, you just have to make it! Stop blaming yourself or others for your problems. Get up, get out there and just do it. Join a church, join a support group, write a resume, make a plan and execute your plan!

Many of our potential clients have not only financial issues affecting their lives, but also immigration issues. It’s not uncommon for a non-citizen to need a bankruptcy case. The first question is whether or not a non-citizen can even file a case. The next question many people ask is whether or not the filing of a bankruptcy affects their immigration status or application for citizenship.

The answer to this question is yes. The Bankruptcy Code states that “…only a person that resides or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor under this title” [11 U.S.C. Section 109(a)]. The term “person” includes invididual, partnership, and corporation… [11 U.S.C. Section 101(a)(41)]. As you can see, there is no requirement of citizenship in the bankruptcy code.

The general rule is that filing a bankruptcy will not affect immigration status or citizenship applications. There are certain criminal convictions that would mandate deportation. It is not a crime to file a bankruptcy case. Crimes of “moral turpitude” such as using credit cards in other people’s names, writing “fruadulent” checks in more than one state, tax evasion, fraudulent transfers of assets, or providing fraudulent information to the federal government (such as by filing inaccurate bankruptcy petitions) sometimes come into play. Certainly if an immigrant has been working “under the table” and not paying taxes, tax evasion can certainly be an issue. It could also be a problem if an immigrant debtor has transferred money or property to another person in order to avoid creditor action. If the amount of the transfer or the amount of the tax liability that was evaded exceeds $10,000, the immigrant debtor could be considered an “aggravated felon” and is conclusively deemed deportable.

Thus, it is very important to be truthful when filing bankruptcy schedules, avoid transferring money or property to anyone (except for normal payments on living expenses), and make sure all income is reported to the IRS on tax returns.

I recently read a Consumer Watch report indicating that the chairman of the Senate’s Permanent Subcommittee on Investigations of the Homeland Security and Government Affairs Committee recently was credited with indicating that regulation and legislation are needed to stop abusive credit card practices. Senators criticized excessive fees and penalty interest rates. They also criticized poor disclosure.

Senator Carl Levin (D-MI) pointed out that by “nickel and diming tens of millions of consumer accounts, credit card issuers reap large profits.” Senator Norm Coleman (R-MN) pointed out that “too many Americans across all economic strata are saddled with high interest rate payments on consumer debt, impeding them from accumulating wealth and achieving their financial goals, including sending children to college and saving for retirement.”

The Board of Governors of the Federal Reserve System reports that credit card debt owed by an average US household has more than doubled since 1992 from $1,000 to $2,200 in 2004.

The credit card industry acknowledges that they could do a better job with disclosure, but defended its pricing practices. The industry says that its approach is “shaped by the market.” Richard Srednicki, the chief executive of Chase Card Services added that risk-based pricing, which can result in higher payments from consumers, is “integral” to the credit card industry.

Citi Cards and Chase announced recent decisions to eliminate repricing under clauses that would allow them to raise interest rates on their cards if the consumer defaults on payments to another provider. They reported that their companies will only raise a customer’s interest rate based on the customer’s behavior with their cards only.

Wow! Debtors attorneys have been saying this for years and these points were all raised in 2005 when the Bankruptcy Abuse Prevention and Consumer Protection Act was passed. Many opponents of the bankruptcy reform legislation wanted to add language to the act that tackled some of these problems. Maybe our legislators have finally gotten wise to this problem.

It also occurs to me that bankruptcy seems to level the playing field a bit for unsuspecting consumers who fall victim to these exorbitant credit card fees and charges.

I’ve read a lot of articles and listened to a lot of reports in the media about the very high foreclosure rates across the country. It seems a lot of people are behind on mortgage payments and face foreclosure. While this news saddens me as I think about the families that are struggling with this problem, I know there could be a solution. Bankruptcy could stop a foreclosure or protect a person from any deficiency balance that might result from a foreclosure sale.

While bankruptcy law generally can not change your payment amount on your residence, it can certainly provide a way to help you get caught up on payments. Even with a voluntary mortgage modification or repayment plan through your mortgage company, you would normally have to catch up on payments (including late fees, accumulated interest, escrow deficiencies, and any attorney fees) within a short amount of time (usually 3-6 months). Through a chapter 13 bankruptcy, you could stretch out payments on the arrears over as much as 5 years…60 months! Obviously paying back the arrears over 5 years as opposed to 3 or 6 months would be more affordable.

The other way bankruptcy could help a person facing foreclosure is through a chapter 7. If you simply can’t afford your mortgage payments, chapter 7 could protect you from owing any deficiency balance on any mortgage once the house is sold at a foreclosure sale.

Either way, if you’re facing foreclosure and don’t know what to do, you might consider calling a bankruptcy lawyer and getting some advice about how bankruptcy could save your house!