Chapter 7 and 13 Bankruptcy in Michigan

What is Bankruptcy?

Unforeseeable situations can arise in life such as divorce, illness, or job loss, resulting in more debt than you can reasonably pay. Our modern free market economy also encourages people to undertake risky borrowing and investing, which can tie up equity and result in substantial losses.

Bankruptcy is an effective system designed to forgive those debts and provide you with a "fresh start."

It is natural to feel embarrassment about an inability to repay debts. However, most bankruptcy filings are not due to careless spending, but rather life-changing experiences such as a divorce, the loss of a job, or a serious illness. Further, bankruptcy only eliminates your legal obligations and prevents attempts to collect a debt. It does not prevent you from repaying a debt! Nothing prevents you from paying a debt after bankruptcy, once you've gotten your finances in order.

Beware of many "bankruptcy alternatives" in the market! Many have undisclosed tax consequences, limited effectiveness, or are flat out fraudulent.

What are the Different Chapters of Bankruptcy?

Bankruptcy is divided into different Chapters:

Chapter 7 is known as "straight" bankruptcy or "liquidation." It requires an individual to give up property which is not "exempt" under the law, so the property can be sold to pay creditors. Generally, those who file chapter 7 keep all of their property except property which is very valuable or which is subject to a lien which they can not avoid or afford to pay.
Chapter 11, known as "reorganization," is used by businesses and a few individuals whose debts are very large.
Chapter 12 is reserved for family farmers and fishermen, and contains special provisions related to their unique situations.
Chapter 13 is a type of "reorganization" used by individuals to pay all or a portion of their debts over a period of years using their current income.

Most people filing bankruptcy will want to file under either chapter 7 or chapter 13. Either type of case may be filed individually or by a married couple filing jointly.

Which Debts Can I Discharge?

Bankruptcy does not discharge secured debts, like a home loan or automobile loan. If you want to keep that property, you may be able to continuing paying on the debt (reaffirm it), pay the creditor the value (redeem it), or have the lien avoided.

There are other types of unsecured debt which cannot be discharged. Student loans, certain federal taxes, and child or spousal support obligations are some examples.

Which Assets Can I Keep?

You are not required to surrender all of your property. In a Chapter 7 "straight bankruptcy" you are generally able to keep all but your very valuable property, or property with liens which you cannot afford to pay. Your exempt property can include up to:

$20,200 equity in your home
$3,225 in your car
$525 per household item up to $10,775
$1,350 in jewelry
$2,025 for business tools, books, etc
$1,075 of any property plus up to $10,125 of any amount of unused homestead exemption

These amount are per person, and therefore doubled in a joint filing. Further, other types of assets may be completely exempt, such as retirement funds.

Do not give into the temptation to spend or borrow against your retirement.

Doing so does not solve the problem, but delays it until you have to repay the loan, or retire. In bankruptcy, retirement accounts are often completely protected.

If you have a regular income, you may qualify for a Chapter 13 "reorganization," where you can keep property and pay all or a portion of your debts over time. This type of bankruptcy also allows you to repay past due amountson an automobile or home over time and prevent a foreclosure or repossession.

What Must I Do To File?

To file a bankruptcy, you must gather the necessary documentation and fees, complete an approved credit counseling course, and submit a completed petition and other forms to the court containing a truthful and complete disclosure of your assets and debt. My representation assists you in every step of this process.

What Happens After I File?

After your filing, you must attend a meeting of creditors, which is routine hearing to verify your information and allow your creditors an opportunity to ask questions. Creditors rarely appear in cases unless there are concerns about a particular exemption or are requesting that you reaffirm a loan. The video below is an example of a typical meeting of creditors (sometimes called a "341 hearing.")

In a chapter 13, you will have to appear at a confirmation hearing to confirm your payment plan. In some circumstances there may be motion hearings to resolve objections regarding the validity of liens, exemptions, or the dischargability of certain debts. You may also have to appear at a reaffirmation hearing if I am unable to certify that you can afford to pay on property you want to keep. As your attorney, I will always appear personally at these hearings directly related to your bankruptcy case.

Finally, you will have to take a post-filing debtor education course. If you are honest and truthful about your assets and debts and otherwise comply with the filing requirements, you will then receive a discharge of your debts. This is an order from the bankruptcy judge forgiving your debts and barring any future attempt to collect. Attempting to collect a discharge debt results in severe penalties against the creditor.

Do I Need An Attorney?

Some consumers attempt to represent themselves in a bankruptcy proceeding, or hire a low cost petition preparation service. Beware, as the bankruptcy code is complicate. Some mistakes - even when made in good faith - can result in wasted time and money, liquidated property, or failing to obtain a discharge of your debts.

If retained as your bankruptcy attorney, I represent you through the complexities of the bankruptcy process. My representation usually includes:

advising you on the legal ramifications of bankruptcy and the alternatives,
counseling you on which chapter is appropriate and what exemptions you may claim,
explaining your rights regarding reaffirmation, redemption, and surrender of property,
preparing the bankruptcy petition, repayment plan, or other necessary documents for filing,
arranging the proper counseling courses and trustee documents,
appearing personally at all court hearings,
advocating on your behalf to the trustee and creditors, and
enforce you rights under the automatic stay and eventual dischage order.

Before an attorney-client relationship is formed, we will enter into a written agreement detailing the scope of my representation.

Where Can I Get More Information?

How do I get Started?

Follow the instructions to your right to review the initial disclosures, begin collecting the necessary documentation, and to setup a free initial consultation with me using the form to your right, or by calling my office.