The decision to file Bankruptcy is not an easy one. I know that many people agonize over the decision for many months before calling me. Most are fearful that they will be mis-treated or looked upon as a failure when they seek out legal help. Some are embarrassed and ashamed. You have my personal assurance that our entire staff understands your situation and that you will, at all times, be treated in a kind, caring, and understanding manner.
Most people who think they should qualify for bankruptcy really do. The 2005 sweeping changes in the law only made it more time consuming to file, not impossible. We offer to analyze your situation at NO CHARGE and give you an opinion on what chapter you qualify for. Fill out our contact form and I will call you TODAY. You may also, at no charge or obligation, come into the office to ask your initial questions and receive your free qualification analysis.
Many of my clients ask the same good questions at their initial consultation. As a courtesy to you, I have listed and answered the most Frequently Asked Questions below. If you have a question that is not answered here, you are welcome to send me an e-mail: firstname.lastname@example.org or call and schedule an office visit. The first visit is no charge or obligation. Evening appointments are always welcome. Our fees for a Chapter 7 Bankruptcy are the most affordable in Michigan. Our service area is from the Mackinaw bridge to Kalamazoo on the west side of the state. We have offices in Grand Rapids and Cadillac to serve you.
Chapter 1 - General Questions
Should I file for Bankruptcy?
Yes, if you can not pay your bills as they come due or your are about to lose some of your property to a creditor. Another reason is the amount of stress your financial situation is placing on your family. High stress levels are not healthy and can disrupt one’s personal and family relationships.
How will filing affect my credit?
If you are considering filing bankruptcy, your credit is probably already in trouble. Filing for bankruptcy is generally better than having a foreclosure on your credit report. You can recover from a bankruptcy filing in much less time than a foreclosure or repossession. And the myth that you can not get credit for seven years is just not true.
Is a Chapter 7 or Chapter 13 my best option?
Generally, I think a Chapter 7 is the best option. It is a streamlined process that is over in just a few weeks. Chapter 13 is a payment plan that lasts three or five years. And the payment amount set by the court can be very difficult for many people to live with. Under the new 2005 laws, some people with high incomes will be forced to file a chapter 13. I will examine this issue during our first meeting.
I am current on all my bills, and I have never been late, Can I still file?
Yes. The fact that you have been able to ‘make it’ does not mean you do not qualify for bankruptcy. Usually people have placed themselves in extreme hardship to get the bills paid on time. There always reaches a point where they can no longer do it. You do not need to wait until you are behind to contact us for help.
Will my employer or landlord find out that I am filing bankruptcy?
Maybe, but usually not. Only creditors are contacted by the court. And notice of the bankruptcy is not placed in any major newspaper. It is published in a legal news journal. However, there are hundreds of filings each publication. Your employer or landlord does not have the time to read all of the listings each week.
Does my spouse have to file bankruptcy with me?
No. A married person may file as an individual. The filing does not affect the credit of the other spouse. It also does not place their property at risk.
Can my employer legally fire me for filing?
No. This is now illegal. Not too many years ago, many West Michigan employers routinely fired employees who filed. Thank goodness those days are gone.
Can I go to jail if I do not pay my debts (and do not file bankruptcy)?
No. The United States does not and never has jailed anyone who has not paid a debt. This is why we left England many years ago…remember? Oddly, this question keeps coming up.
Can I keep my credit cards?
Yes, you can keep cards that do not have a balance owed on them. However, some credit card companies, when they learn of your bankruptcy, may cancel your card. And of course, if you file bankruptcy on a credit card, that company will not give you a new card and line of credit.
Will I receive a 1099 for the amount of the debts discharged?
No. This is one of the big advantages of bankruptcy over a debt consolidation.
Can I run up my credit cards before I file?
No. This is a crime and a fraud on the creditors. We hear of this occurring now and again and advise that you do not do it. And if the creditor’s can prove that you did this, your right to file bankruptcy may be take away.
Should I file on my utility bills?
Usually not. Utility bills are not really debts. They are just monthly bills. If you are way behind on your bills, the answer may be yes. And if the bill was from a prior residence, the answer is always yes.
Can I give away property before I file?
No. You are allowed to give gifts if the total is under $600. If the amount is over $600, the trustee may be able to take the property back from the person you gave it to or take away your right to file bankruptcy.
Can I pay back family members before I file?
No, do not do this. If this has already occurred, we will need to examine the amount of the payments and how long they have been paid to determine what the court will do.
What is the ‘means test’?
The Means Test is really an income qualification tool to determine if you are allowed to file a Chapter 7 Bankruptcy or if you must file a Chapter 13 Bankruptcy. Individuals over a certain income must file Chapter 13. Most people in Michigan do not exceed these limits.
I had my driver’s license taken away for not paying a judgment, will bankruptcy get it back for me?
Yes. This is probably one of the biggest advantages of bankruptcy over any other form of financial assistance we provide. Upon your filing, we send a copy of the bankruptcy notice to the Michigan Secretary of State and they will then allow you to re-apply for your license.
Chapter 2 - Chapter 7 Information
What is a Chapter 7 Bankruptcy?
Chapter 7 bankruptcy, is also referred to as straight bankruptcy. It is a liquidation proceeding. All dischargeable debts are eliminated. No money is paid to the court or on the unsecured debts. The debtor receives a ‘fresh start’. The entire process takes less than four months. The debtor is allowed to keep virtually all of their property, assuming it fits into the exemption schedule. I will examine the exemption schedule with you at your first appointment.
What are the most common reasons people file for Chapter 7?
1) Large medical bills;
2) Unemployment or disability;
3) Seriously overextended credit;
4) Marital problems;
5) Other large unexpected expenses.
I filed for bankruptcy before, can I file again?
Yes, you can file a Chapter 7 eight (8) years after your last chapter 7 filing. It used to be six years before the law changed. The time periods differ if your last filing was a chapter 13.
If I use a credit counselor won’t I get a better credit rating than if I file Bankruptcy?
No. A Bankruptcy will cost you less money and you will be able to re-build your credit much faster. Many so called debt counselors are nothing more than a rip off. They are unscrupulous companies in the business of stealing. There are some good ones, but even they have little to offer.
What debts are not erased by a bankruptcy?
1) Debts for personal injury or death caused by your drunk driving;
2) Student loans unless the court finds that the debt would impose an undue hardship on the debtor and his or her dependents; (this is very difficult to prove)
3) Most tax debts;
4) Child support and alimony;
5) Debts pursuant to a divorce judgment and your spouse objects;
6) Debts for obtaining money by fraud, false pretenses, or theft.
7) Debts for some fines and penalties in criminal cases;
8) And a few other very narrow exceptions.
Can I keep my tax refunds?
Generally, yes. The refund will need to be exempted. And assuming you have enough of
an exemption to cover it, you can keep it.
If I am surrendering my home, how long can I stay in it?
You can stay in the home at least 6 months after the foreclosure process has begun.
What happens when the case is filed?
Immediately upon filing, an automatic stay is invoked by the court. This court order prohibits the creditors from calling, writing, or contacting you in any way, or collecting any money by any means. They are literally, ‘dead in the water’.
What if I have been sued, and I have judgments against me, can I still discharge the debt?
Yes, no problem. The fact that they have got a judgment or sued you, will not stop the bankruptcy from discharging the debt.
After the case is filed and completed, I want to pay some of the debts that were discharged, can I?
Yes, after the case is closed, you are free to do as you wish. Technically, paying a debt that was discharged would be a gift to the creditor. You are free to give gifs to anyone you wish.
If I pay one creditor, can the others then come after me then. No.
Will creditors appear at my meeting with the trustee (also called the 341 meeting)?
Probably not. They are allowed to appear and question you. However, in the last one hundred petitions we filed, only one creditor appeared at one meeting.
Chapter 3 - Chapter 13 Information
What is a Chapter 13 Bankruptcy filing?
Chapter 13 is the Bankruptcy code under which a person may enter into a re-payment plan for some or all of their debts. This plan is supervised and controlled by the bankruptcy trustee. The trustee deals with the creditors, not you. You must make regular payments during the life of your re-payment plan. The length of the plan is usually five years. The trustee collects your plan payment and then pays the creditors in accordance with the plan. Upon completion of the payments called for in the plan, the debtor is released from liability for the unpaid dischargeable debts. The main difference between a Chapter 13 and a Chapter 7 bankruptcy has to do with what property a debtor can keep. In a Chapter 7, all non exempt property must be surrendered.In a Chapter 13, the debtor can retain most or all of the non exempt property. Further, the Chapter 13 discharges a broader range of debts than a Chapter 7.
Why should I file a Chapter 13 and not a Chapter 7 bankruptcy?
1) Because you wish to repay all or most of the debts and you have the income to do so;
2) You have non exempt property that you wish to keep that would be lost in a Chapter 7;
3) You are not eligible for a Chapter 7.
4) You have debts that are dischargeable under a Chapter 13, but not under a Chapter 7;
5) You are behind on your home payments, and need the court to force the bank to accept payments on the arrearage.
What is a Chapter 13 plan?
This is the agreement with the court stating what your obligations are and how much you must pay each month. It is a several page document that we prepare for you as part of the bankruptcy filing.
Must all debts be paid in full in a Chapter 13?
No. Unsecured debts are usually paid only a percentage of what is owed. And they can not add interest while the plan runs. Secured debts must be paid 100%. Typical secured debts are your house and automobile.
How much will my plan payment be?
Usually all of your extra income above your basic necessities is paid into the plan. The determination of what are basic necessities is where you need the experience of a good attorney.
What is my creditor’s do not approve of the plan?
So what? They have little to say in regard to the approval. The court has the final say as to what is approved or not.
I am self employed, can I file a Chapter 13 bankruptcy?
Yes, the eligibility requirements are the same for self employed as everyone else.
If I can not make the plan payments, can I convert to a Chapter 7?
Maybe. This is a very difficult question to answer generally. If there has been an unforseen change in your circumstances it may be possible. If you simply do not like the payment amount, it can not be changed. Of course, you always have the option to drop out of the plan and dismiss the bankruptcy. But then, you will be right back to where you started.
Can I keep my tax refunds in a Chapter 13 Plan?
No, refunds must be paid over to the trustee.
Do I lose any legal rights by filing a Chapter 13?
No. This is not a criminal proceeding. You do not lose any rights to vote, carry firearm, hunting, or to any other business licensing.
Do I have to have my wages garnished by the trustee?
Generally, yes. And this of course, lets your employer know you filed a Chapter 13. The trustee will not allow direct payment from you.
What happens to the creditor’s that do not file claims?
They do not get paid. At the completion of the plan, the debt you owe them is discharged in full. It seems foolish for a creditor to not file a claim, but in almost every case we handle, there are at least a couple that fail to do so.
If my income changes, can the plan payment be changed?
Generally, yes. So long as the change was not voluntary.
Can I add creditor’s where I incurred new debt during the plan?
No. There are a couple of very narrow exceptions, but do not expect to be able to.
Chapter 4 - Property Information
Can I keep my automobile?
This is the first question most people ask when they are in my office. The automobile is a necessity. The court grants a generous exemption. 99% of people can keep their automobile. I will examine this issue during our first discussion. If you have payments due on the automobile, you must continue to make the payments.
Can I keep my home?
Generally, Yes. Many people have a very strong desire to keep their family home. And we understand that. The home is even more of a necessity than an automobile. You must have somewhere to live. Obviously, you must continue to make the payments. Bankruptcy will not allow you to keep the home and not pay for it.
What circumstances must exist for me to not be able to keep my home?
The primary reason the court may not approve you keeping your home is where the home is more luxury than shelter. If all of your neighbor’s homes are worth about $100,000 and yours is worth a million, clearly, you have a luxury home. The court will not allow you to not pay your debts and keep such a home. Few people in Michigan have this problem.
What is an exemption? And what property is exempt?
An exemption is the amount of value in a given item of property that the court has determined that a person filing bankruptcy can keep. Exempted property can not be taken by the creditors or the trustee. Property which is in excess of the allowable exemptions, must be turned over to the trustee. I will examine all your property and advise you on what is exempt.
Can I keep my 401k, pension plan, profit sharing plan, etc.?
Usually yes. “ERISA-qualified plans” are excluded. There is no limit on the amount you
have in these plans.
Will they come to my home and take my property or look to see what I have?
No. This is a myth. I can understand why most people would be traumatized by this if it were to actually happen. They will only wish to examine your property if they have reason to believe you have lied to the court as to the value of the property.
Do I have to disclose all of my assets?
Yes. All debts and assets must be disclosed by law and noted in your petition.
What about my boat, motorcycle, and ATV?
These items are usually considered luxury goods. There is no specific exemption for them. You may be able to keep them if we can fit their value into one of the other exemptions.
Chapter 5 - Debts
Will the bankruptcy stop bill collectors from calling?
Yes. The automatic stay granted at the time of filing court orders all creditors to stop calling, writing, or contacting you in any way.
How long after filing will the creditors stop calling?
After the bankruptcy petition is filed, the court mails a notice to all the creditors listed in your bankruptcy schedules. This usually takes a couple of weeks. Creditors will also stop calling if you inform them that you filed the bankruptcy petition, and supply them with the case number. If a creditor continues to use collection tactics once informed of the bankruptcy they may be liable for court sanctions and attorney fees.
Who deals with the creditors during the bankruptcy process?
I do. That is my job as your attorney. You no longer have to speak to any of them.
Will the filing of the bankruptcy stop my wages from being garnished?
Yes. This will stop immediately upon the filing. Wages taken before the filing are not generally recoverable. So, if your wages are being taken, do not delay in giving me a call. If a creditor takes your wages after the case is filed, they must give them back.
What if the creditor has filed a lawsuit? Can they be discharged also?
Yes. No matter where they are in the legal process, they are stopped “right in their tracks”. When your discharge is granted the local court dismisses the lawsuit and closes the case forever.
Can I file on back child support and alimony obligations and discharge them?
No. this is one of the few protected areas.
Should I file on debts where I am a co-signor? And what affect will this have on the other parties to the loan?
Yes. This will have no affect on the other parties. And, should they default at some point in the future, you do not have to worry about the creditor coming back on you.
What if someone co-signed on a loan with me, will they have to pay the debt if I file bankruptcy?
Yes. The law requires you to file on all debts. The result of your filing will be that the creditor looks to the other parties for payment. They will now be stuck paying your debt. One solution, if you can afford it, is to continue to pay the debt. You are not required to do this, but for personal reasons, you might believe you must do this.
Who notifies the creditors and bill collectors?
The court takes care of this for you. This is one of the reasons they charge a relatively expensive filing fee.
What is a secured debt? And, what is an un-secured debt?
A secured debt is one where the creditor has a lien on the property you purchased from them or some other property you own. This is a form of collateral. The most common item used for security in a secured loan is an automobile.
An un-secured debt is where the creditor only has your promise that the loan will be re-paid. It does not involve collateral. Some examples of unsecured debts are credit cards, department store cards, medical and utility bills.
What if I forget to list one of my debts on my petition?
If the oversight is discovered early enough, we can amend the petition and add them. Once the discharge is granted, the only way to add them is to re-open the case. This is expensive, time consuming, and there is no guarantee that the court will allow the addition.
Can I discharge student loans?
Generally no. Two exceptions exist: (1) The student loan may be discharged if it is neither “insured or guaranteed by a governmental unit” nor “made under any program funded in whole or in part by a governmental unit or nonprofit institution.” Or, (2) The loan may be discharged if it imposes an undue hardship on the debtor or the debtor’s dependents. It is not easy to prove that a hardship case exists and it takes a special hearing to do so.
Can I pay a debt that was discharged through my bankruptcy?
Yes. You can re-affirm the loan or just pay it. A reaffirmation is where you go to the creditor and sign a document that reinstates the old debt. You are never required to sign such a document. Reaffirmations are common with secured assets and where family members had previously co-signed for the debt.
Chapter 6 - Ok - I've Decided to File, What Do I Do?
I have divided the process into 8 easy steps. They are as follows:
Step #1: Qualification:
Call my office and make an appointment or click on the free online analysis. We will review your situation and I will determine whether you qualify. I will answer all your questions.There is no charge or obligation for this appointment and analysis. 99% of people who ask for this analysis actually do qualify.
Step # 2: Information Gathering:
I have a very easy form that will gather the basic information. We also now have the capability for you to give us the basic information online. I will also generate a supplemental list of required information based on your specific case. Once you complete the package, mail it to me, or scan and e-mail it to me, or drop it off at my office. You do not need an appointment to drop this off. I always pull a credit report from all three credit reporting agencies to make sure we have all the creditors listed. We do not charge extra for the credit reports.
Step # 3: Review petition:
Within 48 hours after receiving all the necessary information from you, I will have a rough draft of the final petition prepared. I usually e-mail this to my clients, but if you do not have e-mail, do not panic, we can still mail it. You are required to read every page of the petition and verify the accuracy of your information. Please mark any necessary corrections right on the petition and return it to my office so that I may prepare a final draft. After the petition is returned, please schedule your next office appointment.
Step #4: Complete your pre filing counseling:
The counseling can be done online or over the phone. You do not have to travel anywhere to complete this. It is paid for by my law firm, so you do not have any additional costs. It is easy and will take about an hour. You can not fail, and they can not say you do not qualify.
Step #5: Sign petition:
We will review the final draft together. I will answer any new questions that may come up. Once we are both satisfied that the petition is complete and accurate, we can both sign it. Your payment in full is due at this time. Now that I have a completed petition, I will file it with the bankruptcy court electronically.
Step #6: Complete your post filing counseling:
The post filing counseling is almost the same as the pre filing counseling. You must complete it for your case to be approved. It can be done online or over the phone. You will not have to travel anywhere or spend any money. It is paid for by my law firm.
Step #7: Attend creditor’s meeting:
This is a meeting at the office of the trustee. It is not at the courthouse. In most cases, you never will need to appear at the courthouse. You will receive notice of this meeting a couple of weeks after filing. You must attend this meeting. You must bring your driver’s license and proof of your social security number. It is mandatory that you attend. If you are married and you filed a joint petition, you and your spouse must attend. Neither spouse can testify for the other. This meeting will last approximately 10 minutes. It usually not be at the time scheduled, because the trustee runs behind. The trustee will ask a few simple questions to verify the information in the petition and to determine if it really is you he is speaking to. This meeting is routine in nature and should not be a matter for great anxiety or concern.
Step #8: Put this all behind you and get on with your life:
Everyone who files bankruptcy can re-build their life. It does not carry the stigma that it used to. In this hard economy, thousands of people in West Michigan have had to file. You are not the only one.
Chapter 7 - Client Corner
It has been several weeks since I filed, one creditor will not stop calling or writing, what do I do?
No problem. Document the information and send me an e-mail. If you receive anything in the mail, mail it to me. You do not need to call the office. I will contact the creditor and warn them. I have never failed at getting a creditor to stop calling or writing.
What is a discharge and when do I receive it?
The discharge is the legal term for the debts officially being eliminated. It is the step right before the closing of the case. The discharge is a permanent order to the creditors requiring that they refrain from taking any form of collection action on the discharged debts. You will receive notice of the discharge about three months after the case is filed.
Is there anything my creditors can do to stop my bankruptcy?
Generally no. The exception is where you have committed a prohibited act and the creditor can prove it. Some examples of prohibited acts are as follows: 1) transferring assets to hide them from creditors; 2) lying or providing false information on your petition; 3) destroying or concealing records; 4) violation of a court order; and 5) perjury or other fraudulent acts.
How long will my bankruptcy be reported on my credit report?
It will appear on your credit report for up to 10 years.
I forgot to list a creditor, what can I do now?
Contact me immediately so we may discuss the situation. Generally they can be added. There is a small charge for this service.
Will I ever be able to get credit again?
Yes. You can begin to re-build your credit right away. First, the most important thing is to get your budget under control. No matter what, you must now live within your means. Once you budget is under control, you can begin to acquire some credit by paying your rent or mortgage on time. If you have a car payment, always make the payment on time also. Eventually you can apply and receive a small loan. Make sure you re-pay it on time. You may never be on an equal
footing with someone who has never paid a bill late in their life. But, trust me, you can start over and re-build. It is never too late.
I have a question that is not answered here, will you answer it for me?
YES, I sure will. Send me an e-mail with your question. If it is a common one, I will also add it to the list.