Bankruptcy Q&A Frequently Asked Questions about Bankruptcy in Detroit

Bankruptcy is a legal procedure designed both to protect an individual or business that can't meet its financial obligations and to protect the creditors involved. To begin the process, proper papers must be filed.

Bankruptcy is a legal proceeding in which a person (the debtor) who is unable pay his or her bills (the creditors) can get a fresh start.  Bankruptcy is started by filing a petition with the Federal Bankruptcy Court.  The petition discloses all of the debtor's financial affairs including assets and liabilities.  Filing bankruptcy immediately and instantly, though sometimes only temporarily, stops creditors from seeking to collect debts.  Bankruptcy may also eliminate a debtor's obligation to pay many, if not all, debts incurred prior to the bankruptcy filing.   

There are specific chapters of the federal bankruptcy law. Proceedings under Chapter Seven (known as straight bankruptcy) involve taking most of the borrower's property. The court appoints a trustee to sell off the assets and distribute the cash among the creditors.

Proceedings under Chapter Thirteen (known as wage earner's bankruptcy) involve the borrower proposing a plan for repaying a portion of the debt in installments from the borrower's income.

Once the bankruptcy proceeding ends, the borrower is no longer liable. This occurs when the bankruptcy court enters a discharge order in a Chapter Seven case or the borrower has paid the debts due to his creditors according to a plan in a Chapter Thirteen case. In legal terms, the court has discharged the borrower from the debts. The borrower then starts over again with a clean financial slate, but the record of the bankruptcy will remain on the borrower's credit record for up to ten years.

Bankruptcy may be the best, or only solution for extreme financial hardship. However, it should be utilized exclusively as a last resort, since it always has long lasting consequences.

What happens to my house and car ?

If you get behind in payments on debt secured by a lien against your home or car, creditors can repossess these items. Even if you voluntarily surrender the property, it may be considered a repossession for all legal purposes. Under repossession, the items will be sold, and money from the proceeds will be applied to the debt. If the sale proceeds are not enough to satisfy the lien and the expenses of the repossession sale, you may be held responsible for the difference. At this point, creditors can take whatever legal action is necessary, including filing a lawsuit against you.

The filing of a bankruptcy action cancels this debt, so that you will have no further obligation to pay. Under reorganization, you may have the opportunity to stop the repossession or to pay the debt under controlled circumstances with credit terms that you can afford. In some cases it may be possible to cancel the lien altogether. Sometimes it's even possible to have the repossessed property returned if it has not been sold.

Bankruptcy laws and procedures are complicated, so if you think you may need to reorganize your debts or file for a complete bankruptcy, you should to contact a qualified bankruptcy attorney.

How will lawsuits be affected?

Declaring bankruptcy prevents any lawsuits from being filed or judgments entered against you. If you file bankruptcy and a lawsuit against you is pending, it can go no further. If a judgment has been taken, its enforcement can go no further without first getting permission from the bankruptcy court.

If there are potential lawsuits against you, often the bankruptcy court will offer a forum where the dispute can be rapidly settled--thus avoiding the time and expense of taking the matter to state court.

Bankruptcy may be the best solution for extreme financial hardship. However, it should be used as a last resort, since it can have long-lasting consequences. The record of a bankruptcy can remain on your credit file for as long as ten years.

Be sure to consult with an attorney and a financial expert before resorting to bankruptcy as a means of solving your economic troubles.

Can employers discriminate?

It is illegal for an employer to discriminate against an employee that files for debt consolidation under Chapter 7 or Chapter 13. This includes both private and governmental employees. In addition, it is illegal for local, state, or federal governmental agencies to discriminate against a person as to the granting of licenses, permits, and similar grants because that person has filed debt consolidation. It is also illegal to be denied Federal Guaranteed Student loans solely for having filed a Bankruptcy.

For more information on employer discrimination in bankruptcy cases, talk with an attorney experienced in bankruptcy law.

Can student loans be included?

There are debts that are not dischargeable in Chapter Seven bankruptcy.

Federal law provides that student loan obligations cannot be included in any type of bankruptcy proceeding. The only exceptions to this rule are if the loan was originally due more than seven years prior to filing bankruptcy, or if repayment would cause the individual "undue hardship."

Nevertheless, inclusion of a student loan obligation in a debt consolidation proceeding may provide some benefit. For instance, the Automatic Stay provisions apply to student loan creditors, even though a student loan is not dischargeable. Therefore, the filing of a debt consolidation petition will stop telephone calls, harassment, and lawsuits from proceeding without permission of the Court. If you are able to satisfy your entire student loan obligation during the term of your debt consolidation plan, you could avoid interest and late charges which may otherwise be incurred.

Bankruptcy may be the best, or only solution for extreme financial hardship. However, it should be utilized exclusively as a last resort since it may have long-lasting consequences. Be sure to consult a financial expert before resorting to bankruptcy as a means of solving your economic troubles.

What does chapter 13 do to credit ?

Chapter Thirteen bankruptcy is a form of bankruptcy in which the debtor agrees to pay back his or her debts in small, regular payments. Therefore, this form of bankruptcy often results in the repayment of debts. Chapter Thirteen bankruptcy, however, still has long-lasting consequences and a record of it remains on credit files in credit bureaus for up to ten years. In some cases, potential creditors are more lenient with debtors who filed Chapter Thirteen, as opposed to Chapter Seven bankruptcy because they know the debtor is working to pay back a large percentage of the debt. Credit grantors have no legal duty, however, to give any special consideration on this basis.

For more information about the effects of Chapter Thirteen bankruptcy on credit, please consult attorney Walter Metzen toll free at 888-4WALTER or 888-DEBTGONE.

Are employers notified?

Although bankruptcy by an individual is a matter of public record, employers are not usually notified when a Chapter Seven case is filed. However, the trustee in a Chapter Seven case may contact an employer for information on the debtor's wages or salary at the time the case was filed. If there are important reasons for not informing an employer in a particular case, the trustee should be notified and he or she may be willing to make other arrangements to obtain the necessary facts.

For more information on Chapter Seven bankruptcy, consult with attorney Walter Metzen toll free at 888-4WALTER or 888-DEBTGONE.

Foreclosure of property?

Foreclosure of property is the legal process which enforces a mortgage and results in the public sale of property for payment of a defaulted loan. Under state law, this procedure may be initiated once the debtor on the loan has failed to comply with the obligations under that loan. Bankruptcy will stop a foreclosure proceeding from continuing until the Bankruptcy court grants approval for its continuation. Often the Bankruptcy Court will refuse to allow the foreclosure to continue if the individual filing bankruptcy has proposed for the payment of this debt in his or her Chapter Thirteen plan. Permission to continue with the foreclosure proceeding may also be denied if there is substantial equity in the property and a sale of the property will not only pay off the loans against that property, but also provide funds to the debtor and to the other creditors.

Bankruptcy will also stop the repossession of certain personal property under state law. Retention of this personal property is generally provided for in a debtor's Chapter Thirteen plan, or through certain exemptions in his or her Chapter Seven case.

For more information on foreclosure of property, consult attorney Walter Metzen toll free at 888-4WALTER or 888-DEBTGONE.

Whether or not your spouse needs to file Chapter Seven bankruptcy with you as a joint petitioner depends upon when the debt was incurred and the type of debt. In a community property state, your debts are usually your spouse's debts. Creditors may pursue your spouse for the entire community debt, unless it was incurred prior to marriage or can be shown to be a separate property debt. When a couple has separated, it makes good sense to at least offer a joint filing to the separated spouse. If the debts were incurred before marriage, or after legal separation with no intent to reunite, the spouse need not file.

There are advantages to filing Chapter 13 over Chapter 7 bankruptcy.

The first advantage is if you had people co-sign loans or other credit. Your creditors cannot collect from your cosigners until it is clear the Chapter 13 plan will not pay the amount owed. In contrast, if you file Chapter 7, your creditors have the right to immediately demand payment from your cosigners.

The second advantage is the discharge of debts under Chapter 13 is broader than it is under Chapter 7. For example, if you successfully complete a repayment plan under 13, individual creditors can't require you to pay in full if you gave them false financial information when you applied for credit, or if you used some other fraudulent means to get credit. Under 7 however, any creditor to whom you gave false or fraudulent information may object to discharging you from repaying the debt you owe.

Third, you can file under 13 more often than under 7. The law forbids you from filing under Chapter 7 more than once every six years. However, Chapter 13 allows you to file repeatedly.

Another advantage may be when you reapply for credit after the end of your bankruptcy proceeding. Potential creditors might prefer to see a Chapter 13 on your credit record instead of a Chapter 7. Chapter 13 often results in the repayment of debts. Creditors will know you are paying a greater percentage of your debt than you might in Chapter 7, although they have no legal duty to give any consideration on this basis.

For more information, consult attorney Walter Metzen toll free at 888-4WALTER or 888-DEBTGONE.

Chapter 13 vs. private debt consolidation?

Chapter 13 allows people who have steady incomes to pay all or a portion of their debts. In this type of debt consolidation case, the person who files must submit to the court a plan for the repayment of all or a portion of his or her debts. The plan must be approved by the court to become effective.

In contrast, private debt consolidation usually involves small loan companies that offer debt counseling through the use of high-interest "bill payer" or "debt consolidation" loans. There are also "financial counselors" who charge large fees.

Chapter 13 may be the best, or only solution for extreme financial hardship. However, it should be used as a last resort, since it can have long lasting consequences in relation to your credit.

On the other hand, private debt consolidation is seldom the recommended solution under any circumstances. A much smarter approach would be a nonprofit credit counseling service. They will contact your creditors and negotiate longer, smaller, and more manageable payment programs. For more information on Chapter 13 versus private debt consolidation, contact the credit counseling service of your city.

Chapter 13 Bankruptcy Frequently Asked Questions 

What is Chapter 13?

Chapter 13 is a chapter of the Bankruptcy Code that is structured for wages earners or small businesses. It enables debtors to immediately stop all debt collection activities (wage attachments, mortgage foreclosures, lawsuits, telephone calls, letters, bank setoffs). While this collection activity is stayed, your attorney proposes a plan of repayment and you begin pay on it. The plan may in most circumstances, propose payments in an amount less than 100% of your debts. Many debtors repay 10%, and some even pay less. The plan usually continues for three years, but in no event may it exceed five years. When the court confirms the plan, it becomes binding on your creditors. After you complete payments under the plan, the court cancels the balance of your debt. Chapter 13 is used frequently to stop mortgage foreclosures and can save your home; even at the last moment.

 What is the "automatic stay"?

The automatic stay is an automatic injunction against most continued collection activities. The automatic stay goes into effect as soon as your bankruptcy case is filed with the bankruptcy court. The automatic stay is important because it protects you from all collection activities. The automatic stay applies to virtually everyone and stops all activities that are calculated to collect money from you, or make it uncomfortable or embarrassing on you so that you want to pay. It stops everyone except for criminal courts demanding fines or restitution. It does not get you out of child support. It does not get you out of spousal support. It does not stop you for being arrested for not paying a fine. It does not give you criminal immunity. The automatic stay is "automatic". The court issues it just because you filed bankruptcy. You do not have to prove anything to get it.

Who can file a Chapter 13?

The Bankruptcy Code says that any individual with a regular income, i.e. a person with a stable income regular enough to allow him or her to make payments under a chapter 13 plan, can file a chapter 13 case. You do not need to have a job to file. You need only to have some source of regular income. You may not file a chapter 13 if a creditor has requested relief from the automatic stay in a prior bankruptcy that you filed, and you voluntarily dismissed the case. This bar continues for 180 days from the date you dismissed your case. You may also be barred from filing for the 180 day period if your case was dismissed for willful failure to abide by orders of the court, or to appear before the court in proper prosecution of his case.

Is there a limit on how much I can owe?

Yes. You cannot file a chapter 13 if you owe more than $269,250 in unsecured debts (e.g. credit cards, signature loans, other non-collateralized liability) and $807,750 in secured (mortgages, new car loans, etc.) debt.

Who notifies the creditors that I have filed?

The court notifies the creditors. It usually takes about two to three weeks. Some creditors may not "notice" that you have filed due to their size. They may continue to call you and send bills after you have filed. This may be because the address you give to your attorney may be just a billing service. Many creditors use these billing services instead of doing it themselves. There may be incompetent people working for the services. It is therefore important that you list the address given for reporting billing errors and not the payment address. The "errors" address usually goes to more competent people, since they need to know how to comply with federal law on billing errors.

Can a Chapter 13 save my home from foreclosure?

Yes, in most cases. One of the main purposes of a Chapter 13 is to enable a homeowner to cure the default owed to a mortgage company. In other words, to reinstate a mortgage to its pre-default status. This is done through payment of a Chapter 13 "plan." Under this plan, the debtor makes payments to a trustee usually over a 36 - 60 month period, which sum includes sufficient funds to reinstate the loan to current status. During this time period, the mortgage company cannot sell your home or in any way continue with the foreclosure process. If the mortgage company has not posted your home for foreclosure before you file your bankruptcy case, then the mortgage company cannot post your home for foreclosure after you file. However, you must make your regular mortgage payments while your Chapter 13 case is pending. If you fail to make your regular mortgage payments, the mortgage company can request that the Court modify the automatic stay to allow the mortgage company to foreclose on your home.

Can a Chapter 13 get my repossessed car back?

In many cases, the answer is also yes. However, if the car has been sold, or if you simply wait too long after repossession, it may be difficult or impossible to recover the vehicle. You must check with your attorney at the time you file for a more definitive answer. Most vehicle loan companies will return a car voluntarily after you file a chapter 13 (provided the car is not sold) if you show adequate insurance. This insurance usually must include collision and name the finance company as a loss payee, meaning the policy must specifically mention the loan company as the person/company which gets paid first in the event of a loss.

Can a Chapter 13 get my house back after a foreclosure sale?

This is a good reason why one should not to wait until the last minute to file. The short answer is "almost never." The long answer is "sometimes." Generally once your house is sold at a foreclosure sale, there is no sense filing a chapter 13 to try to save it. The filing of a case will not, in and of itself, set aside or vacate a foreclosure sale held in a regular manner in accordance with the law. Sometimes, and this is rare, the state court may set aside the foreclosure sale if the sale was conducted in an illegal manner, or without proper notice. It is usually very difficult to get a court to set aside the sale. Therefore, once the "hammer falls," you had better start looking for another place to live.

Do I have to maintain insurance on my home during the Chapter 13?

Yes. If you fail to maintain insurance on your home during your chapter 13 case, the chapter 13 trustee who will move to dismiss your case (throw it out of court) for refusing to protect the rights of your mortgage company and your other creditors. A destroyed home makes lousy collateral for a mortgage, puts the debtor out on the street and generally has a negative impact on future chapter 13 plan payments. You must have and maintain a current and valid fire insurance policy on all real estate to stay in bankruptcy.

How much will I have to pay in a Chapter 13 plan?

That depends upon several factors including, but not limited to, the amount of the arrearage on any secured debts such as your mortgage or car loan, whether you owe back taxes, the amount of your income, and the amount of your reasonable monthly expenses. Plans may not exceed 60 months. Some creditors may include interest over the life of the plan. This may also increase the amount you are paying. Interest over the life of the plan is sometimes allowed if there is sufficient equity in the property (i.e. the amount you would realize after final sale). Don't have any secured debts? If you are not curing mortgage or vehicle payment arrears, then your payment is governed by several rules: The payment must be the debtor's "best effort," that is, all of the debtor's projected disposable income that is earned in the three-year period will be applied to make payments under the plan. "Disposable income" means income which is received by the debtor and which is not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor; including a small charitable contribution not to exceed 15% of the debtor's gross income.

I do not have a job. Can I file Chapter 13?

Generally, any individual with a regular income can file a chapter 13. A regular income can come from social security, SSI, SSDI, private disability insurance, retirement income, government assistance (welfare), or any source of regular and dependable income.

Can I use rent receipts as income to fund my plan?

Yes, if you are receiving rent from any source, you can indeed use it to fund a chapter 13 plan.

What if my mortgage company or other creditor overcharges me? Do I have to accept what they say?

Just because you filed a bankruptcy, your creditors, and even and especially, your mortgage and car finance companies do not have the right to double charge, overcharge or charge without a reasonable explanation an sum amount in their proof of claim. A "proof of claim" is the document filed by a creditor stating what they believe you owe. It is not infallible. As a matter of fact, it is very often wrong. Fortunately, there is a way to handle any objection to any amount claimed from the debtor in bankruptcy. It is called an Objection to Proof of Claim and it can be filed for any claim.

Should I seek credit counseling before bankruptcy?

At present, there is no requirement to do so. Credit counseling may be a good idea to avoid bankruptcy, however, keep in mind certain things. Most credit counselors get paid by a percentage of what is paid to the creditors, by the creditors receiving the funds. this means that they have an interest in seeing that the creditors get the maximum. Credit counselors, therefore, do not have a "confidential relationship" with you. A confidential relationship is the type of relationship you have with an attorney. The attorney is legally obligated to avoid conflicts and represent only your interests. An attorney could be disciplined or disbarred from accepting payments from adverse parties, such as your creditors. Statements made to attorneys are always confidential, if made in private (between you, your spouse and the attorney, with no one else present). Statements made to a counselor are not. Credit counseling can be good for some people. It helps many people avoid bankruptcy, however, it is an open question whether is makes much of a difference on your credit record. The new bankruptcy law may require counseling, however, for now, there is no reason to follow the mandates of a statute that may never be passed, unless you want to for your own reasons.

In some circumstances, credit counseling is a very wrong answer. These include many of the reasons that people file chapter 13 in the first place:

1. You should not seek credit counseling first (you should seek legal counsel) if your home or other real estate is in foreclosure.

2. You should not seek credit counseling if you have been sued in court.

3. There may be other reasons. If you have a question, it is always better to speak with an attorney first. Credit counselors simply cannot give legal advice you can rely upon, like an attorney can.

When should I consider filing a Chapter 13?

You should consider filing a chapter 13 if:

1. Your house is being foreclosed upon.

2. You have received a notice from your mortgage company that they intend foreclosure at any time in the future.

3. You need some time to catch your breath, so that you can regain control of your life from your creditors.

4. You are in severe financial difficulty and have tried, but cannot work other arrangements with your creditors.

5. You have property (real or personal) that you need to protect and are in danger of losing to a creditor.

6. You have committed a wrongful act respecting the debts (misrepresentation, fraud, etc.) and you feel that a creditor would object to your discharge in a chapter 7.

7. You have income to pay less than 100% of the debts you owe and would like to make (in most cases) interest-free payments to unsecured creditors.

8. You have an honest desire to not "run away from" your creditors, but are not in a financial position to pay all the debt, or all the debt and all the interest on that debt.

You should be aware that payments to mortgage creditors generally cannot be reduced or modified.

How can I pay for an attorney if I am "bankrupt?

There are a number of different manners of payment. One should consider that he will not be paying a significant portion of his indebtedness so that in itself, may free up funds for counsel fees. Sometimes, some of the fee may be paid through the chapter 13 plan without interest. You will then have up to five years to pay! This will increase your plan payments only marginally. Many people still would want to pay prior to filing because the total fee would be less.

How can I stop creditors harassing you or your family?

Filing a Chapter 13 acts as a stay (which means an Order of the court preventing this) of ALL creditor activity, including all collection action. This includes, suits, phone calls, letters, "friendly reminders" of indebtedness or visits from bill collectors. This includes legal papers, of course. Please note that it is the Bankruptcy Court that notifies your creditor. Therefore, just because you have filed bankruptcy, it does not mean that all your creditors will know immediately. It may take a few weeks for them to learn of the filing through the court. If a particular creditor is getting on your nerves, let me know and I will contact them. The harassment should then cease. If it does not, you may have the right to bring legal action against them.

What if I owe the electric company, will they shut off my power?

The Bankruptcy Code prohibits your local power, water, telephone, or any utility company from discriminating against you because you have filed a bankruptcy. It cannot shut off your power, water or phone service or refuse you any utility service just because you filed. You should be aware that your local utility company may request a deposit from you for continued service.

What about my credit record?

Fact: Bankruptcy will hurt your ability to obtain credit for some time to come. That you have filed a chapter 13 will appear on your credit record for ten years. In some circumstances, i.e. credit transactions in excess of $50,000, the credit record can reach back even further. Generally, the best (and probably the only) way to get good credit is to pay your bills, or at least the minimum amount due, when they become due. A chapter 13 will be listed on your credit record as just that; a chapter 13 bankruptcy. Your creditors may also be able to see if you completed your plan successfully, which is certainly to your advantage. Some people may be fortunate enough to find a creditor willing to overlook their bankruptcy. This may or may not be you; the question is left entirely up to the individual creditor. By the way, the bankruptcy trustee will require you to cut your credit cards in half and return them to the creditors. YOU MAY NOT CONTRACT FOR CREDIT WHILE THIS CASE IS PENDING!

I wrote a bad check to a creditor. Can that be discharged in a chapter 13?

Issuing a bad check is a crime in most states. The bankruptcy will not protect you from criminal prosecution and will not discharge criminal liability for restitution, costs or fines. In addition, you can be arrested, notwithstanding the bankruptcy. It is strongly recommended that you satisfy all bad checks before you file.

What exactly is expected of me in a Chapter 13 case?

The following are among the most important obligations you have in a chapter 13 case:

1. Be truthful to all authorities involved, including your attorney. Lying in a bankruptcy proceeding is a federal crime and is punishable as such. It is often the case that a debtor can accomplish better results by truthfully disclosing unfavorable facts than by lying about them.

2. Pay the plan faithfully. I will tell you the amount of your plan payments. If you miss two consecutive payments, your case is subject to dismissal. You may wish to request a wage attachment. If you do, the payments will come directly from your pay and you will not have to worry about payments, as long as your employer is making them. Of course, if your employer stops making payments for any reason, it is your responsibility to continue them. By the way, your first plan payment will be due the first full month after you file your bankruptcy. Retain your money order receipts as proof of payment.

3. Attend court when directed to do so. Your court appearances will be minimal. Most debtors only appear one time, at what is called a "section 341" Meeting of the Creditors. At that meeting, the creditors are allowed to attend and ask questions, although it is rare that they actually do.

4. Generally, these are the items that you will need to bring to a meeting of creditors:

• Proof of your income (pay check stubs, etc.).

• Proof of income from rent (leases or other agreements to pay you).

• Proof of insurance for all vehicles and for your home (fire insurance or proof that the same is being paid through your mortgage payment) .

• Copy of your most recent tax returns and any other items requested by the trustee.

5. PAY YOUR MORTGAGE! You may have been told of this obligation, but it cannot be stressed enough. Current monthly mortgage payments must be maintained. Payments must commence the month after filing your case. Pay the regular monthly amount to your mortgage company unless you are instructed to do otherwise. Should payments be refused by your mortgage company, report this fact to me at once. You are never excused from making current monthly mortgage payments. Your failure to comply with this requirement will eventually cost you your home. Be sure to retain your canceled checks as proof of payment. It is usually a good idea to enclose a copy of your bankruptcy petition with your first check to your mortgage company as proof of the filing of this case. They will need to know that you are in a chapter 13 case in order to begin accepting payments again. If you do not pay your mortgage payments (post-petition) and the mortgage company gets relief from the stay (is allowed to proceed with or commence a foreclosure), you are not allowed to just dismiss your case and start over. If you dismiss your case after a motion for stay relief is filed, then you must wait 180 days to refile. If the trustee dismisses your case, then the 180 day period is not applicable. Therefore, it is sometimes better to consider dismissing your case yourself if you get behind in your mortgage. There is no way to know exactly when a motion for stay relief will be filed by the mortgage company. It is best to stay current.

6. Obey all orders of the Bankruptcy Court.

7. Pay your car payment! If you fail to keep this current, your car is subject to repossession after relief from the stay is obtained. You must also keep your car fully insured.

What are the chances of my bankruptcy "not being accepted?"

For some reason, many clients are under the impression that "their bankruptcy has to be accepted." The truth is that once the case is filed, it is "accepted" by the court and the debtor receives relief from all debt collection activities, including, but in no way limited to:

• The immediate stay of any litigation, excepting criminal and child support (also certain family matters);

• Harassing phone calls;

• Requests for payment;

• Repossessions;

• Electrical, water, telephone or other utilities being shut off;

• Most types of setoff activity.

While it is true that your plan must be confirmed (i.e. made binding upon the rights of your creditors) by the court, your creditors do not have to accept the plan if:

• It is your best effort;

• It provides for a payment to unsecured creditors in an amount at least as much as they would receive if you had filed a Chapter 7 bankruptcy;

• It provides that secured creditors will retain their liens; and

• It otherwise complies with the minimum requirements for a chapter 13 plan under the law;

Of course, the statements above are simplified for the lay person's understanding. This is not to say that there may be other issues for the attorney to consider.

What if I want to sell my home (or real estate), and I have already filed a Chapter 13?

Sometimes, the debtor(s) in a chapter 13 case realize that the best way out of their problems is to liquidate (sell) their home or other real property owned by them at the time of filing. Many times the debtor(s) do not realize that all real estate owned at the time of the filing is subject to the jurisdiction of the court. Some courts in certain jurisdictions feel that, or allow plans that, revest complete ownership of the property when the plan is confirmed. Most of the time, however, the debtor(s) need to get permission of the court to sell their property.

After a sale, most times the trustee will take control of the proceeds after the liens are paid. The realtor and attorney(s) will need to get court approval of their fees in order to get paid from the sale. Realtors need to be appointed first in many if not all jurisdictions. The realtor, therefore, cannot just appear at the settlement or closing of title and ask that the title clerk or closing attorney withhold his fee. Furthermore, all sales prices are subject to approval of the court. If the court feels that the sales price is inadequate, then the court will disapprove the sale. If the court disapproves the sale and the sale takes place anyway, then the purchaser may not have valid title (thus creating a major headache for the purchaser and his title company).

In summary, when you sell real estate in a chapter 13, your creditors may get paid before you do. This depends greatly on the exemptions you and your counsel claim when you file.

I lost my job or cannot make my plan payments for another reason. What can I do?

If you are paying for arrears on your mortgage as a result of a foreclosure or threatened foreclosure, or for any reason, then your plan may already be at a minimum and may not be able to be reduced. If your plan calls for a certain percentage to unsecured creditors (e.g. credit cards, etc.), which percentage was based upon a wage figure that you can no longer support, then the plan can be reduced accordingly, as long as you provide for full payment for your mortgage arrears and any other arrears (e.g. vehicle payment arrears) that you need to pay.

If your plan has no secured creditors, then you can modify the plan to reduce it to any reasonable level that the court will approve. Often, you attorney will need to file a motion to have the new plan approved.

I just got some extra money. Can I pay off my chapter 13 plan early?

The answer is yes, if you are willing to pay your creditors 100%. Most courts will require a debtor to be in a chapter 13 at least for 36 months. The reasoning is that if the debtor has the money to prepay the plan, he maybe really did not need a break anyway. The debtor will be expected to continue to make his or her plan payments for at least the balance of the plan or a minimum of 36 months. The plan is not a loan that can be "prepaid."

What happens when I complete my Chapter 13 obligations?

After you have completed payments under the plan, and if no objections to discharge are filed, you will be receiving your discharge in bankruptcy. You are not be required to appear in court to get your discharge order. The discharge, as you know, "cancels" certain debts that you had at the time the bankruptcy was filed. It does not affect the lien of secured claims, however, it will cancel the personal liability only, on those debts. This means that if you owe money on the secured debt after you receive the chapter 13 discharge, your collateral is still subject to repossession, unless you remain current with that creditor.

If no objections to discharge are filed, you can expect to receive an order, signed by the Judge, in the mail after your completion of the plan. When you receive the discharge order, you should put it in a safe place with your other valuable and important papers because you may have to show it to creditors later.

What is the effect of a bankruptcy discharge?

You must understand several things about your bankruptcy discharge:

• ONLY DEBTS LISTED ON YOUR BANKRUPTCY SCHEDULES can be discharged. If you have a debt that you owed at the time that the bankruptcy was filed, but do not have it listed, it will not be discharged. If you have such a debt, speak with me immediately and I will file amendments to the schedules and amend the plan, if required.

• ONLY DEBTS OWED FROM THE PERIOD BEFORE THE BANKRUPTCY WAS FILED WILL BE DISCHARGED. This bankruptcy discharge will not discharge debts that you became obligated to pay during the bankruptcy. Your discharge will only cover your personal obligation to pay debts. It will not cover co-signers on your debts and it will have no effect on most security interests, like home mortgages and encumbrances on motor vehicles.

• If you want to REAFFIRM A DEBT, AVOID A LIEN, OR REDEEM PROPERTY, you must do so BEFORE THE CONFIRMATION ORDER IS SIGNED. Therefore, you should tell me now if you want to do this. An explanation is in order:

  • Certain liens (judgments, levies, non-purchase-money interests in household goods) can be eliminated entirely by asking the court to do so. There is an additional fee for this service. If you are interested in this service, let me know and I will quote a fee.

  • Other liens, like mortgages, motor vehicle encumbrances, and purchase money security in other goods cannot be eliminated.

  • If you think that any of these agreements or motions should be filed in your case, or if you want additional information, contact me.

• Remember: You can pay anybody you want after your discharge however, few debtors do. Depending on the length of your plan, you may not receive a discharge for 3 to 5 years.

• The bankruptcy code prohibits the discharge of certain types of debts. Upon your request, I can describe to you in detail the types of debts that cannot be discharged. These debts include, but are not limited to: educational loans that first became due less than seven years ago, child support, certain taxes, including income taxes less than three years old. Furthermore, your taxes may not be dischargeable even if they are more than three years old in certain circumstances. These are, but are not limited to the following: (i) If you did not file a return, or (ii) if you did not file a return on time. In many instances, income taxes over three years old may be DISCHARGEABLE, however, to be sure, you must review your specific case with me.

• It is important that you know the significance of your discharge order. If a debt is discharged, that creditor cannot force you to pay that particular debt. This means that the creditors cannot legally file an action against you (for that debt), continue an action that it had filed before the bankruptcy, send you collection letters or harass you in any other way. If this type of harassment occurs, you should contact me immediately, and I may be able to sue the creditor.

• This information sheet is intended only as a summary of certain points of interest regarding your bankruptcy discharge. The terms used in this information sheet are intended to be simple so that they can be understood, the law is much more detailed. This information therefore is not "the law" and is only a summary designed to help you understand this phase of your bankruptcy.

Each bankruptcy is unique. Your case may have special facts making further discussion necessary. Do not be afraid to raise any issue if you feel uneasy about it. I will be pleased to answer any question you may have.

What if I forgot to list a creditor?

It is usually not a problem if it is caught before the confirmation hearing. This can be done even after the plan's confirmation. There is a Bankruptcy Court fee of $20. Your attorney may also charge a small additional fees for the service.

How can I hire you as my attorney to file a Chapter 13?

Please call me at 313-962-4656 or 888-4WALTER to request an appointment or send me an email at 8884walter@sbcglobal.net. Fees  are dependent upon the complexity of the individual case. Most fees are standardized, however expedited or complex matters may be charged accordingly.

What is Chapter 7 Bankruptcy?

Chapter 7also called "straight" or "liquidation" bankruptcy, is a way to legally discharge which is a legal term meaning wipe out or cancel your debts. When a person or married couple file a Chapter 7 bankruptcy, they are basically seeking a fresh start financially. Most of my clients complain that creditors and collection agencies are calling them at home and at work, utility companies have shut them off or are threatening to do so, or perhaps their wages are being garnished.  Filing a Chapter 7 bankruptcy can stop all of these dead in there tracks. Basically filing a Chapter 7 is accomplished by filing papers with the United States Bankruptcy Court asking for protection.  As soon as your case is filed (stamped with the date and time) an Order for relief is entered.  The Order for relief creates the "automatic stay" described in more detail below. Most people who file a Chapter 7 are seeking to wipe out debts like credit cards, medical bills, utility bills, bank and credit union loans, car loans for which the car was repossessed, in an accident with no insurance or just  broke down before it was paid off. A Chapter 7 discharge will wipe out or extinguish all of these debts. Chapter 7 involves an exchange between the person filing and the US Trustee, whose job it is to gather any non-exempt property of the debtor for the benefit of creditors. The person filing the Chapter 7 in exchange for getting all of their dischargeable debts wiped out, must disclose all of their assets (things and rights they own) to the Trustee.  In the vast majority of Chapter 7 cases that are filed, nothing is taken and sold by the Trustee, most cases are no asset cases. Remember, Chapter 7 is designed to leave you with a fresh start.  This means that the law is very generous in what you are allowed to keep or claim exempt. The most important thing is to list or disclose everything you own in your  bankruptcy petition. Most, but not all debts are dischargeable in Chapter 7 bankruptcy. Chapter 7 gives you a fresh start on your economic life within certain limitations. A person cannot file a Chapter 7 more than once every 6 years and certain types of debts are not dischargeable.  Student loans, most taxes, alimony and child support and debts for death or personal injury caused as a result of drunk driving or other intoxication are not dischargeable as a matter of public policy. Also, some people may have used credit in a fraudulent manner. For example, Chapter 7 bankruptcy is not for people who run up their credit cards with the intent of shortly thereafter going into bankruptcy. Chapter 7 bankruptcy is also not for people who charge much more than they could ever afford to pay just to discharge those debts. Moreover, it is not for anyone who basically acts in a dishonest or fraudulent manner. It is for the honest debtors, who, for circumstances they cannot control, find themselves overwhelmed in debt. Chapter 7 is also generally not appropriate for someone trying to save his house from a mortgage foreclosure. Generally, if you are about to lose your home for any reason, a Chapter 13 should be filed. Further, Chapter 7 is not for someone with the ability to make some reasonable payment on a month basis to unsecured creditors. For instance, if your budget would allow you to pay even ten cents on a dollar to creditors, you should generally file a Chapter 13 instead. See attorney Walter Metzen for a professional analysis of your financial situation and a thorough discussion of which Chapter may be best for you.

What is the "automatic stay"?

 THE AUTOMATIC STAY IS THE COURT ORDER THAT STOPS CREDITORS IMMEDIATELY, even if they don't yet know you filed bankruptcy. The automatic stay is one of the most powerful tools you as the debtor get when you file your bankruptcy petition. It happens automatically upon the filing of your case either Chapter 7 or Chapter 13.  It is so powerful that it can stop a foreclosure, a car repossession a utility shut-off and even a wage garnishment. I have even had the repo man return a car that he took from my client because a bankruptcy had been filed even though the repo man did not know. Most creditors who are regularly in the business of lending money know and respect the power of the automatic stay in bankruptcy and will abide by the law. The automatic stay is an automatic injunction against most continued collection activities. The automatic stay goes into effect as soon as your bankruptcy case is filed with the bankruptcy court. The automatic stay is important because it protects you from continued harassment from your creditors. The automatic stay applies to virtually everyone and stops virtually all activities that are calculated to collect money from you, or make it uncomfortable or embarrassing on you so that you want to pay. It stops everyone except for criminal courts demanding fines or restitution. It does not get you out of paying child support. It does not get you out of spousal support. It does not stop you for being arrested for not paying a fine. It does not give you criminal immunity. The automatic stay is "automatic". The automatic stay goes into effect immediately upon the filing of your bankruptcy petition. 

Should I seek credit counseling before bankruptcy?

Many of my clients have tried credit counseling before coming to see my to file a bankruptcy.  Credit counseling agencies which advertise heavily on television and call themselves non-profit agencies. Credit counseling agencies have no "real power" to deal with your creditors. Most actually get paid a percentage of the money that you pay your creditors through the agency. Most charge a start-up fee and a monthly maintenance fee which over the long run can add up significantly. Most people in credit counseling eventually do need to file a bankruptcy to deal with their creditors so the credit counseling was in vain. Some credit counseling agencies request access be given to a persons checking account so that the collection agency can take money out of the account every month or every pay period. I strongly discourage giving anyone such access to a bank account, I have seen many problems result from giving such access, such as bounced checks and inability of the debtor to make other necessary payments due to a disruption in their income. Credit counseling may be a good idea to avoid bankruptcy, however, keep in mind certain things. Most credit counselors get paid by a percentage of what is paid to the creditors, by the creditors receiving the funds. this means that they have an interest in seeing that the creditors get the maximum. Credit counselors, therefore, do not have a "confidential relationship" with you. A confidential relationship is the type of relationship you have with an attorney. The attorney is legally obligated to avoid conflicts and represent only your interests. An attorney could be disciplined or disbarred from accepting payments from adverse parties, such as your creditors. Statements made to attorneys are always confidential, if made in private (between you, your spouse and the attorney, with no one else present). Statements made to a counselor are not.  Does this mean that credit counseling is always a bad idea? No, credit counseling can be good for some people. It helps many people avoid bankruptcy, however, it is an open question whether is makes much of a difference on your credit record.

In some circumstances, credit counseling is a very wrong answer. These include many of the reasons that people file chapter 13 in the first place:

1. You should not seek credit counseling first (you should seek legal counsel) if your home or other real estate is in foreclosure.

2. You should not seek credit counseling if you have been sued in court.

3. There may be other reasons. If you have a question, it is always better to speak with an attorney first. Credit counselors simply cannot give legal advice you can rely upon, like an attorney can.

I owe a lot of money to DTE Energy or SBC Ameritech, will they shut off my utilities if I file a bankruptcy?

No, a utility may not deny you service because you exercised your constitutional privilege to file a bankruptcy petition seeking relief from your creditors. In fact, I have filed many cases for individuals or couples for the only reason that they have huge utility bills and have been shut-off. The filing of a Chapter 7 will wipe-out all the past debt owed to the utility and the company has to start you fresh as if you just moved to Detroit from Timbuktu.  The utility companies by law cannot deny you service simply because you filed bankruptcy.  The law recognizes them as a public monopoly because you can't simply go to Meijer's and buy electricity or natural gas for your home. The way it works is this: You file your bankruptcy petition, being sure to list whichever utility company you owe on your list of creditors (schedule F and Matrix).  Approximately 10 days to 2 weeks later, the Bankruptcy Court mails out notices to all of the creditors you listed in your case.  All of the utility companies regularly get bankruptcy notice and most even have a bankruptcy department.  The company looks up all the accounts in your name, sometimes using a combination of your name and social security number.  Any and all accounts in your name are then wiped out and started fresh back to the date your petition was filed. Note: You are responsible for paying the new utility debts you incur after filing your bankruptcy (either Chapter 7 or 13).  If your utilities were cut off prior to your filing bankruptcy, tell my office and a fax will be sent to the utility company with proof of your filing and instructions asking them to restore service.  They will always restore the service unless it was turned on illegally (which is fraud and may not be dischargeable) or it turns out that the utility service was in some other person's name (who did not file bankruptcy). Your utility company may not discriminate against you because you have filed a bankruptcy case. This means they must continue supplying you with service and may not cut you off. Please note that your utility company will probably request a deposit from you for continued service. The deposit remains your money, but is held by the utility company as security for service. The deposit is usually equal to approximately twice your average monthly bill. If you owe no money to your utility company and do not list them as a debt, then utility companies may waive the requirement for a deposit. Note: Some services such as cable tv, internet or cell phone services are not considered utilities since you can go to another service provider (i.e. they are not a monopoly) or they are not considered essential utilities (yet).

How quickly can I or we (joint husband and wife cases) file a Chapter 7 Bankruptcy ?

Very quickly depending on your situation. I have literally filed a bankruptcy case within the same hour that the person came to see me.  This was an emergency situation to prevent the foreclosure of the person's home.  Filing the bankruptcy before the sheriff's sale was concluded stopped the sale and gave the debtor a breathing spell. Usually depending on your situation and the difficulty of your case, I prepare your case and file it within a matter of a few weeks of your initial consultation. In cases where a person's wages are being garnished, I will file the case the same week.  How quickly the case gets filed also depends on you. All documents required must be supplied to my office and all Court and attorney fees required must be paid before the filing. My office generally files cases every week. If your case requires an urgent filing, please come see me in my office to make arrangements to get your automatic stay in place as soon as possible.

I'm married and want to file alone. How will my filing Bankruptcy affect my spouse?

There is no requirement to file jointly if you are married.  Many of my cases are filed for only one spouse of the married couple. If you are married and need to file by yourself the other spouse's credit report is usually not affected, because it is separate and distinct from yours, especially if there are no joint creditors.  If both husband and wife are joint on a debt (such as a credit card or medical bill), I would normally recommend a joint bankruptcy filing.  

How much debt do I need to be in to file a Chapter 7 Bankruptcy?

There is no minimum debt requirement in order to be able to file a Chapter 7.  The analysis of whether to file a Chapter 7 depends more on your present ability to repay your creditors.  Other factors to consider are the level of creditor harassment (i.e. calling you at home and work), utility shut offs, wage garnishments or other creditor actions.  I usually don't recommend a Chapter 7 Bankruptcy for any individual unless there is at least $5000 in debt to wipe out or discharge, making the filing worthwhile.  However, I have filed Chapter 7 cases for individuals with less debt but were being garnished by one or more creditors and made only minimum wage therefore making it impossible to file a Chapter 13 repayment plan.  I have also filed cases for people whose utilities were shut off and needed the Bankruptcy Court protection of the automatic stay to get turned back on.

Do I have to file Bankruptcy on all of my Credit Cards? What if I want to keep one?

Yes, if you owe a balance, list the debt. The law requires you to list all of your creditors on your bankruptcy petition. I tell my clients that even if they owe the local video store $3.79 for an overdue video, to list it on your bankruptcy schedules.  Many of my clients are worried that they cannot live without their Mastercard.  Trust me, life is possible without credit cards.  If you truly must have a credit card, there are options. If you have a credit card with a zero balance, it does not have to be listed and you may use it after you file bankruptcy. If you have a credit card with a low balance, you may wish to pay it off before filing your case.  Some creditors, particularly Sears, offer to cut your current balance to $500, even if you owe them $10,000 or more, if you reaffirm (sign an agreement that says you promise to pay them despite the bankruptcy) with them. Many of my clients are reporting to me that they are receiving pre-approved credit card applications shortly after filing their Chapter 7 case.  These are solicitations from credit card companies, even some of the same that were just discharged, enticing you to get back into the game. If used wisely and frugally (i.e. paying the balance in full each month), these may help you re-establish your credit.  Remember though, in many cases, overspending and overuse of credit cards are what often lead to the bankruptcy in the first place.  Be careful!

Where does my Chapter 7 Bankruptcy case get filed?

If you live in the Metro Detroit Area it will be filed in the US Bankruptcy Court for the Eastern District of Michigan, Southern Division located at 211 West Ford, Downtown Detroit.  Remember, bankruptcy law is a federal law and is therefore assigned to the Federal District Courts.  The Bankruptcy Courts are a subset of the Federal District Courts and hear all cases assigned to them.  All cases filed in Wayne, Oakland, Macomb, Monroe, St. Clair and Washtenaw Counties must all be filed in the Detroit Bankruptcy Court. If you live in the Flint or Bay City area, your case may be filed in there own jurisdiction.

What happens after my case is filed with the Bankruptcy Court in Detroit?

After your case is filed, the Court clerk usually mails out the "Notice of Commencement of Chapter 7 Bankruptcy" to you, your attorney, the Trustee assigned to your case and most importantly, all of your creditors.  This is why it is important to try your best to list all of your creditors in your bankruptcy.  They need to have "Notice" that you filed. The Notice of Commencement contains information about you such as your name, address and social security number so that the creditors can enter the fact that you filed a bankruptcy in your system and end collection activities.  The notice contains instructions and explanations regarding the automatic stay and penalties for violating the stay (i.e. trying to collect a debt from you).  The notice also tells you when and where your Meeting of Creditors will take place.  This is your Court date and you must attend it otherwise your case will be dismissed.  I as your attorney am also  required to attend  your "meeting of creditors." This "meeting" is actually not much of a meeting at all. You (and your spouse if this is a joint filing) must attend. I will be there because I include this in your fee, and the Interim Trustee will be there. The trustee is an attorney who is appointed to ask you questions about your case, which you will be required to answer under oath. The trustee then reports to the bankruptcy judge as to whether he recommends a discharge. All this may sound scary, but it is actually a brief and routine procedure. Most people are amazed at how easy it is. You will learn more of this later in the case. Naturally, your creditors may attend the meeting, but they rarely do. Once the meeting of creditors is concluded, the trustee will make his report to the court and will usually recommend a discharge. After the trustee makes his recommendation, the court will enter a "discharge" within about three months. The reason you will not be granted a discharge immediately, is that the creditors are given some time to object to your discharge (approximately 60 days after your .341 meeting of creditors unless an extension is granted), or to make application to the Court why their particular debt should not be discharged.    See the "Required Documents" link for a list of what you need to bring to this Court hearing with you.

What about my credit report, how will it look after filing Chapter 7 Bankruptcy?

My friends tell me that I won't get credit for seven years after I file, is this true?  I get this one all the time. First of all, understand that there is no law that says a future creditor or some other lender cannot give you credit after you file bankruptcy. In fact, these days with well over 1 million personal bankruptcies being filed every year, there is an entire credit industry that has evolved that solicits actively to individuals and couples who have recently filed a case.  My clients call me all the time just a few months after their bankruptcy and want to know what is going on, why are they getting all of these pre-approved credit card applications in the mail and how come all these finance companies want to sell them a car? Well the short answer is that these potential creditors want to be first in line to be your new credit cards after your fresh start. They no that most people will only file one bankruptcy in their life. That if the original bankruptcy was filed just because of bad financial planning (i.e. not loss of job, disability, divorce etc.) that the debtor probably has learned something from the experience and will be more careful with the way they use credit in the future. Finally, the creditor knows that you may not file another Chapter7 bankruptcy seeking the discharge of new debt for a period of six years. There is no question that a bankruptcy will hurt your ability to get credit in the future. But by the time a person comes into my office, their credit is already very bad.  The benefits of the bankruptcy discharge will greatly outweigh any negative impact on the credit report in the vast majority of cases that are filed. The fact that you filed a chapter 7 will appear on your credit record for ten years. Generally, the best (and probably the only) way to get good credit is to pay your bills on such terms as you originally agreed when they become due, i.e., pay at least the minimum payment. Bankruptcy, as you probably have figured out already does not pay your bills, it only releases you from personal liability or responsibility on them. In effect, the debt will still exist, but your creditors will be legally stopped from collecting anything from you, forever. Even if a year later you will $100 million in the lottery.  In other words, and for all intents and purposes, the indebtedness is canceled. While the bankruptcy will be listed on your credit record, you may be fortunate enough to find a creditor willing to overlook this, but then again, you may not; this question is entirely left up to the creditor. No one can be forced to give you credit and you should not contract for credit while your bankruptcy case is pending. Be careful with new credit card or other credit offers, remember, credit card are what got you here in the first place.

If you pay your post-bankruptcy case bills after the case is closed, you may find some creditors that are willing to give you credit -- possibly as soon as a year or two after you get your discharge. When you use credit again, it is in your best interests to use it with great restraint. In order to reduce the risk that you will have to ask the court for relief again, it is better to pay cash until you are very certain that circumstances are substantially changed from the way they were when you filed. Since you cannot ask the court for a Chapter 7 discharge more than once every six years (Chapter 13 may still be available though), you may put yourself and your family into jeopardy unintentionally and unnecessarily.  
 

I still have room on my credit card, should I "Max it out" before I file to take full advantage of the Bankruptcy discharge?  Should I take out some cash advances before I file?

This is not recommended before filing bankruptcy. The Bankruptcy Code does not allow for a discharge of every debt. Certain types of debts and certain conduct of the debtor will prevent a discharge of the debtor or a discharge of a particular debt. Section 523 of the Bankruptcy Code explains what debts cannot be discharged under chapter 7 (and 13 in some cases). In particular, look at section 523(C):

(C) for purposes of subparagraph (A) of this paragraph, consumer debts owed to a single creditor and aggregating more than $1,000 for ''luxury goods or services'' incurred by an individual debtor on or within 60 days before the order for relief under this title, or cash advances aggregating more than $1,000 that are extensions of consumer credit under an open end credit plan obtained by an individual debtor on or within 60 days before the order for relief under this title, are presumed to be non-dischargeable; ''luxury goods or services'' do not include goods or services reasonably acquired for the support or maintenance of the debtor or a dependent of the debtor; an extension of consumer credit under an open end credit plan is to be defined for purposes of this subparagraph as it is defined in the Consumer Credit Protection Act;

This means that if you take large cash advances within 60 days before you file, these may not be discharged. You may be stuck with the debt after the court cancels your debts. Furthermore, if it can be shown that you had no intent or present ability to pay the debt (cash advances or your "running up" your credit card; i.e. buying a whole lot of stuff before you file knowing that there would be no way to pay), then the court could consider it a fraud and disallow the discharge of that debt even though you are outside the 60 days. Be careful. Filing bankruptcy is not like winning the jackpot. Bankruptcy is meant for honest debtors who honestly incurred debt. It is not meant for people wanting to make a quick killing in the consumer market or even for someone who really needs the money but has no way to repay it.

What is the Bankruptcy Discharge and how will the discharge affect me?

If no objections are filed, you will receive a discharge in bankruptcy. The discharge "cancels" or "wipes out" certain debts that you had at the time the bankruptcy was filed. A bankruptcy discharge also has the following effects:

• It voids (cancels) any judgment determining personal liability on a debt; and

• It prohibits creditors from taking any action to collect a debt as a personal liability of yours.

However, if a debt is secured by a lien on any property belonging to you (e.g., a home mortgage or lien on a title to a vehicle), the discharge does not prevent the creditor from repossessing that property. Generally speaking, you must pay a secured debt according to its terms to avoid repossession.

Also, while a discharge relieves you of responsibility, it does not relieve anyone else who may be responsible with you on that debt, i.e., a cosigner or co maker. Therefore, if your parent, friend, or relative cosigned on the loan papers, guess who that creditor will go after? Right, your cosigner may be sued by the creditor, and that creditor does not even have to wait until the case is over. This can be an embarrassing situation for both parties. In a Chapter 13 case, your cosigner may be protected.

You will not be required to appear in court to get your discharge order. If the court receives no objections to your discharge, you can expect to receive an order in the mail in approximately three months after your creditor's meeting. When you receive the discharge order, you should put it in a safe place with your other valuable and important papers because you may have to show it to creditors later. Please don't call the Court clerk, the Trustee or my office trying to speed up the discharge process.  Wait for the court to mail it. 

Are all my debts discharged by the court?

Most will be, however, there are exceptions. The next sections list these:

• Only debts owed from the period before the bankruptcy was filed will be discharged. This bankruptcy discharge will not discharge debts that you became obligated to pay during the bankruptcy. Your discharge will only cover your personal obligation to pay debts. It will not cover cosigners on your debts and it will have no effect on most security interests, like home mortgages and encumbrances on motor vehicles.

Are there some debts that are never discharged?

Unfortunately, the answer is yes. The Bankruptcy Code specifies some debts that are not discharged in your Bankruptcy. The list includes:

• Most income taxes (special rules apply)

• Student loans, unless you file a complaint in bankruptcy court claiming and "undue hardship," i.e. very unusual and compelling circumstances (i.e. so disabled you will never work again).

• Governmental  fines and costs (parking tickets, traffic tickets, Court restitution).

• Debts arising from a judgment against you as a result of your operation of a motor vehicle while you were intoxicated causing death or personal injury to another.

• Consumer debts owed to a single creditor in an amount in excess of $1,000 for luxury goods or services within 60 days of the date you file, or for cash advances on your credit line aggregating more than $1,000 within 60 days of your filing date.

• If a creditor files a complaint and proves that your debt to them arises from fraud, breach of fiduciary duty, larceny, embezzlement, defalcation or a material lie on an application for credit, a drunk driving accident restitution for damage you caused, or for willful injuries you caused to another.

• Alimony, maintenance and support to a spouse, former spouse or a child.

What about property with liens on it? Is that debt also discharged?

Yes, but the lien remains; and it is still subject to seizure once the case is finished (see above). However, the following may be of interest to you:

• Certain liens (judgments, levies, non-purchase-money interests in household goods) can be eliminated entirely by asking the court to do so. There is an additional fee for this service. If you are interested in this service, let me know and I will quote such a fee.

• Other liens, like mortgages, motor vehicle encumbrances, and purchase money security in other goods cannot be eliminated. If you want to keep the mortgaged house, encumbered vehicle, or secured item, you may have to enter into an agreement to pay a part of the debt (reaffirmation) or the value of secured consumer debts (redemption). Usually you are better off just continuing to pay for the secured item rather than signing a reaffirmation agreement.

• If you think any of these agreements or motions should be filed in your case, or if you want additional information, contact me. A creditor cannot be forced to reaffirm an obligation, but they may be forced into a redemption (where you pay the fair-market value of the security in one lump sum). Redemptions are rare because most people don't have the money.  Remember, if you want to reaffirm a debt, avoid a lien, or redeem property, you must do so before the discharge order is signed.  I won't always sign a reaffirmation agreement unless I (personally) feel it is in your best interest.

Note: You can pay anybody you want after your discharge, however, few debtors do. It is important that you know the significance of your discharge order. If a debt is discharged, that creditor cannot force you to pay that particular debt. This means that the creditors cannot legally file an action against you (for that debt), continue an action they had filed before the bankruptcy, send you collection letters or harass you in any other way.

Do the automatic stay provisions of the Bankruptcy Code protect money I have in the bank, or is it seized by the court?

Money in the bank may or may not be taken by the trustee, depending on the bankruptcy exemptions claimed. Your exemptions may be either federal or state. Ordinarily, the trustee is the only party that can seize your account once you have filed your bankruptcy case with the court; however, there is one important exception. If you have an account in a bank, credit union, savings and loan or other financial institution to which you also owe money, that institution may refuse to release account funds to you once you have filed bankruptcy. This right of set-off is most commonly used by Credit Unions where you may be a member. This is a very important, and often overlooked aspect that must be considered prior to filing. By the way, there is nothing that prevents a debtor from simply closing an account before he or she files a bankruptcy case.

Are there any circumstances where I could make myself liable on a debt after my discharge?

  Yes. Such circumstances occur when the debtor signs a reaffirmation agreement. Reaffirmation agreements are legally binding contracts between the debtor and a creditor wherein the debtor agrees to be liable once again to the creditor after the entry of the discharge order. Such agreements must always be approved by the court. This approval is necessary to discourage unscrupulous creditors from coercing a debtor to become liable to the creditor after the debtor has been discharged (which legally cancels indebtedness). The court usually discourages reaffirmation agreements, except for good cause. After all, these are generally the same debts that got the debtor into trouble in the first place. Reaffirmation agreements:

• must be voluntary;

• must not place too heavy a burden on you or your family;

• must be in your best interests; and

• can be canceled anytime before the Court issues your discharge or within 60 days after the agreement is filed with the Court, whichever gives you the most time.

If you are an individual and not represented by an attorney, the Court must hold a hearing to decide whether to approve the agreement. The agreement will not be legally binding until the Court approves it. If you reaffirm a debt, which the Court approves and fail to pay it, it is the same as if you never filed bankruptcy respecting that debt (your other debts are still discharged). This means the creditor can sue you and take your property! This is not a good position to be in!

What is a trustee, and who will be appointed?

  After a bankruptcy case is filed, the court appoints a trustee. The trustee has many functions, but primarily, he is appointed to examine your case, as well as the debtor, orally, to determine whether there would be any assets available for creditors. Most people can take the necessary exemptions to protect their property from their creditors and the trustee, who, after his examination makes a determination as to whether he will take physical possession of, or abandon (return legal control) to the debtor. In the vast majority of cases, the trustee will abandon all property to the debtor. Rarely will the trustee take actual possession of property in a consumer case. However, if a debtor owns a valuable piece of non-exempt property, the trustee will take the item and expose it to public sale for the benefit of creditor.

Can I just list and discharge the debts I want and keep the "good debts."

No. All debts must be listed. Even debts to people you like, or feel a special obligation. After the case is discharged, nothing prevents you from paying anyone at all. If you fail to list a creditor, you chances of a discharge are decreased and they are eliminated for the debt you did not list.

I need a credit card. Can I keep one?

Possibly, if you do not owe any money to the creditor issuing the credit card, however, the trustee may demand that you cut up all your credit cards. Once you have made the decision to file bankruptcy, you should not charge anything on any credit cards that you will seek to discharge in your bankruptcy.

Once I file a Chapter 7, what if I need to do it again? Is there a limit to my re-filing?

Once you receive your discharge in a chapter 7 case, you cannot file another bankruptcy and get another discharge, in a chapter 7 case unless six years have passed between the date this bankruptcy was filed and the date on which the new bankruptcy (chapter 7) is filed. This does not mean you cannot file for relief under Chapter 13 of the Bankruptcy Code, also known as a "Wage Earner Plan." You may indeed obtain substantial assistance through a Wage Earner Plan under Chapter 13.

This information sheet is intended as a summary of certain points only. The terms used in this information sheet are intended to be simple so that they can be understood, the law is much more detailed. This information therefore is not "the law" and is designed only to help you understand basic bankruptcy concepts. Each bankruptcy is unique. Your case may have special facts making further discussion necessary. Feel free to raise any issue if you feel uneasy or unsure about it.

How can I hire you as my attorney to file a Chapter 7?

Call my Office at 888-4WALTER or (313) 963-4656 or e-mail me at 8884Walter@sbcglobal.net

Can I plan my bankruptcy?

 Of course!  Good planning is why you are reading my website and hopefully will hire a good attorney. Pre-bankruptcy exemption planning (converting non-exempt assets such as cash to exempt assets such as a car )is allowed so long as it is in good faith and full disclosure is made to the Court and Trustee via your bankruptcy petition, statement of financial affairs and schedules.                                                

  Which bankruptcy is right for me:  Chapter 13 or Chapter 7?

 Many people file both�a Chapter 7 to get rid of unsecured debts and then a Chapter 13 to stop a foreclosure or repossession.  A Chapter 13 is like a bill consolidation loan, and you normally file it to keep property.  A Chapter 7 is used to completely wipe out unsecured debts and to get rid of secured debts for property you don't want to keep.  Both will stop garnishments and Creditor harassment.  Over 50% of all Chapter 13 cases fail because they become unaffordable.  By filing a Chapter 7 first, you get rid of the unsecured debts and make your Chapter 13 repayment less.  Your Attorney may want to file a Chapter 13 because he will earn more than he would in a Chapter 7, but you will usually profit far more from filing a Chapter 7.  Usually, the only times you will want to file a Chapter 13 are 1) when you have already filed a Chapter 7 and can't file another one or 2) if you have so much property and equity that a Chapter 13 is necessary to keep that property, or 3) you are facing an imminent home foreclosure or automobile repossession.

You may also have to file a Chapter 13 if you have so much income (after you pay your normal monthly living expenses) that you can repay your debts within 5 years.  A Chapter 13 may also be used for special purposes, such as to discharge special tax debts, repay child support, repay student loans, or protect a co-signer.  The fortunate thing about virtually all Chapter 7 cases is that the Debtor�s assets are normally exempt, so there are rarely any assets to liquidate (sell and convert to cash for benefit of creditors). 

 Why file a Chapter 7?

 If you have substantial unsecured debts you may want to file a Chapter 7.  You may also want to file a Chapter 7 if you want to surrender property and not owe for it.  You can usually keep all your property in a Chapter 7, because you won't have enough equity in any property to exceed the exemptions allowed.

  Why file a Chapter 13?

 You may want to file a Chapter 13 if you have secured debts and are threatened with foreclosure or repossession, if you filed a Chapter 7 less than 6 years ago, if you wish to protect your cosigner, or if you have debts that are not dischargeable in a Chapter 7 but are payable in a Chapter 13.

 Can I convert from a Chapter 13 to a 7 or from a 7 to a 13?

 Few people convert from a 7 to a 13.  You have more than a 90% chance that you will have to convert from a 13 to a 7.  Over 5 years, you are very likely to miss a payment and have the Chapter 13 dismissed (or have to re-file).  The vast majority of Chapter 13 cases are never finished and are converted into Chapter 7 cases or dismissed outright by  yourself the debtor, the Trustee or one of the creditors having filed a motion to dismiss.  If you are close to completing the plan, you may be granted a hardship discharge.

 What is a Chapter 20?  What is a Chapter 26? 

Some people file a Chapter 7 to wipe out unsecured debts and then file a Chapter 13 to keep their property.  This is jokingly referred to as a �Chapter 20�.  Filing a �Chapter 20� can be the intelligent and affordable way to file a Chapter 13.  Filing a Chapter 7 and then a Chapter 13 to obtain the benefits of both is very effective.  You must, however show that there has been a change in circumstances between the filing of your Chapter 7 and the subsequent Chapter 13 and you must be filing in good faith (i.e. without trying to "play the system").

A �Chapter 26� refers to filing back-to-back Chapter 13 cases.  You would do this to pay debts that can�t be paid in 5 years by just one Chapter 13.  In a sense, you are �extending� your repayment time by filing two Chapter 13s. The Bankruptcy Court will frown on multiple bankruptcies filed repeatedly without making a viable effort at repayment.

If a Chapter 7 or Chapter 13 alone won�t work for you, a 20 or 26 normally will.

How long will bankruptcy take?

 It will take about 3 to 4 months for a Chapter 7 to be final. (You will get a letter within 10 days of filing, telling you the time and date of the 341 hearing.  This hearing will be held about 4 to 6 weeks after you file.)  A Chapter 13 will take as long as the repayment plan takes the normal plan is between 3 to 5 years.  By statute (the Bankruptcy Code), a Chapter 13 plan may not exceed 60 months-5 years.

What are the most common mistakes I can make when filing?

 Not showing up for your hearing and not listing all of your assets and liabilities or debts.  Fail to show up at the hearing, and your case is dismissed. The best policy is to list all your debts and assets.  Always list every debt, even if you think it is non-dischargeable, it may be discharged anyway.  Even include last month�s utilities in your debts.

How do I qualify for bankruptcy? Can I not be approved?

 You qualify for bankruptcy if either your reasonable monthly income exceeds your income or your liabilities exceed your assets.  If you don't qualify, I  will tell you when I consult with you or when I prepare your bankruptcy.  It is very rare not to qualify.  You basically have to be a resident of the Eastern District of Michigan (Detroit area) for at least 6 months, reside in the state you file in, and not have filed within certain time periods (i.e., you can�t file two Chapter 7s within 6 years of each other).

 What if the Court does not approve my Chapter 13 or Chapter 7?

  If there is anything wrong with your Chapter 13 or Chapter 7 bankruptcy it will usually be changed and amended.  Of course, it is less costly and time-consuming to do it right the first time.  If you earn so much money that you can afford a Chapter 13, you will be forced to change it from a Chapter 7 to a Chapter 13. 

How often can I file?

 You can file a Chapter 7 six years after your last discharge from a Chapter 7.  The time is measured from the time of discharge of your first case to the time of filing of your second case.  You can file Chapter 13s as often as needed, but you must be finished with any prior case.  You can only have one bankruptcy going on at a time.

If I file does it mean my old bad debts are erased from my credit report?

 NO!  What is reported is that you had a debt and that a bankruptcy was filed.  Bankruptcy does not give you a good credit record or �repair� your credit record automatically.  You repair your credit by paying your debts on time after the bankruptcy.  Many credit card companies will send you pre-approved credit card applications and car financing offers shortly after getting your discharge.  Beware of these offers, use the credit carefully and you may be re-establishing yourself.

Can I file without an Attorney?

  Yes.  You can file a bankruptcy yourself, and this is called �filing pro se�.  You can also do dentistry on yourself, but we wouldn�t recommend it.  Doing your own case is a very bad idea.  This website alone won�t give you the knowledge you need to do it, but it will help you educate yourself so you can protect yourself from bad legal advice or an incompetent Attorney.

As an example, if you file a reaffirmation, it usually must be approved in a hearing by the Judge, and that will mean extra hearings and time for you.  Considering the time and risk involved, we highly recommend you use an Attorney.  You may lose far more in Court than what the Attorney would have cost�plus there may be extra time and effort on your part. Most people who initially file their case on their own eventually need to hire an attorney to clean up their mess. I often charge more to clean-up a poorly filed do-it-yourself bankruptcy than a new case since it is less time consuming for me to do it right the first time than clean-up a mess.

What about a Bankruptcy Mill?

 Filing a bankruptcy through a Bankruptcy Mill or paralegal may be even worse than doing it yourself.  Many people have lost thousands of dollars with these businesses�through intentional scams or just plain bad work. Beware of persons coming to your house if it is in foreclosure.  These people are scam artists and like vultures circling over an animal dying in the desert, are trying to capitalize on your present desperate situation. Non-Attorney bankruptcy petition preparers are barred by law from providing you with any legal advice, however they often violate this law, often to the detriment of the person filing.  In enacting legislation governing bankruptcy petition preparers, Congress stated: �These preparers lack the necessary legal training and ethics regulation to provide [legal advice and legal services] in an adequate and appropriate manner.  These services may take unfair advantage of persons who are ignorant of their rights both inside and outside the bankruptcy system.� 

The bankruptcy petition preparer's role is limited by law solely to typing.  Unlike an Attorney, a bankruptcy petition preparer can not help you understand the law, advise you on how to answer questions, assist you in planning, or assist you in Court.  They may be useful, but you must be prepared to do all the real work yourself.  Federal law requires that bankruptcy petition preparers sign any documents they prepare; print on the document their name, address, and social security number; and furnish you with a copy of the document.  A bankruptcy petition preparer may not sign any document on your behalf, may not use the word �legal� or any similar term in any advertisement, and may not receive any payment from you for Court fees.  The bankruptcy petition preparer is also required to disclose to the Court the amount of any fee you pay.  Beware of any bankruptcy petition preparer who does not comply with these requirements.

What paperwork do I need to bring to my Attorney?

 Bring the names, amounts, and proper addresses of all of your Creditors. Bring recent pay-stubs, tax returns, car titles, deed to your house and other real property, appraisal or property tax bill for your house and your most recent mortgage balance statement. You may estimate the amounts of any bills you owe, you don't need to call the creditor asking for the specific amount you owe.  It also helps to have the account numbers, but we must at least have perfect addresses to give notice to the Creditors. I have a computer database of addresses to common creditors such as credit card companies, local hospitals, collection agencies and attorneys and the local utility companies.  Credit bureau reports normally don't have the addresses on them.  If you have gotten a Credit bureau report before filing, bring this with you and I will get the addresses for you.

How can I get a copy of my credit report?

 You can get a free credit report if you have been denied  credit, are unemployed, are a victim of fraud.  To get one free (if you qualify) or for a small fee (if you don't) without going through a "middle man" just contact any of the 3 major reporting services below.  They will typically charge $9 to $10. If you have recently been denied credit, you will be able to get a free copy of your credit report. This website has a link to obtaining you report from Experian (the one I recommend). You could also go directly to www.experian.com.

1.  Experian (TRW) at 1 888 EXPERIAN (1 888 397 3742) allows you to charge your credit report to your Visa or MasterCard or debit card over the phone or on the internet.

2.  Trans Union at 1-800-888-4213 or write to:  Trans Union Corporation Consumer Disclosure Center, P.O. Box 390, Springfield, PA  19064-0390

3.  Equifax at 1-800-685-1111 or write to: Equifax Information Service Center P.O. Box 740241 Atlanta, GA  30374-0241.  For $9, you can get an immediate report online from Equifax at:  http://equifax.com/resources/fcra_info_rights.html

If you decide to write to any of these services, be sure to include your: name,  address, phone number, previous addresses for the past  two years, social security number, birth date, employer, signature�and  be sure to include your payment. (You'll have to call to get the payment amount.) Proof of identity such as a photo copy of your driver�s license will also be required.  For your convenience, there is a credit report request form in Section 20.14 of this manual.

Can I file jointly with my spouse?  Does my spouse have to file or sign if I want to file individually?

Yes, you can file jointly.  No, your spouse doesn't have to file but, if most of your debts are joint debts, he or she may want to.  In some cases, where only one spouse has debts or one spouse has debts that are not dischargeable, it might be advisable to have only one spouse file.  There is no need for a spouse to file if the debts are not in his or her name.  If you are filing a Chapter 7, and the bills are also in your spouse�s name, he or she generally should file to be protected. (Co-signers are protected in a 13, but are not in a Chapter 7.)  There should be no additional charge for a spouse filing, but some firms do charge extra.  The only extra work to do in a joint filing is adding an additional name and social security number to the petition.  There is no reason we can think of for your spouse to file a separate petition�it will only cost you a second Court filing fee and Attorney fee.

Will it affect my spouse's credit?

 Is he/she responsible for my credit cards if he/she is an authorized user?  No, filing will not affect your spouse's individual credit, but if he or she is a co-signer on any debt that is not paid that will affect him or her.  The fact that you filed bankruptcy does not appear on a spouse's credit report unless he or she also files bankruptcy. 

Unless your wife has signed to be legally responsible, she is not responsible.  However, many credit card companies will argue that she is responsible.  They may even put a �no pay� on her credit report if the amount is unpaid; however, she may ask any reporting service to correct that.  If she does so, the credit card company will have to show that she signed for it.  If they can�t, it will be removed from her credit report file.  In other words, the credit card collectors may try to collect from her by claiming she is liable, but she really is not.  If they damage her credit record, it may be grounds for a lawsuit.  Credit is normally granted based on a score from your past payment history, the amount of debt that you owe, the length of time you have been repaying present credit, if you have opened credit recently, and the types of credit accounts you have.

 Will my co-signers be protected?

Co-signers are protected only in a Chapter 13 to the extent that the plan pays the full amount of the co-signed debt.  If the plan pays the debt completely, the co-signer is protected, but it will be listed in his or her credit record as being paid late.  The Creditor may ask the cosigner for any remaining portion of the debt if it not paid completely.  In a Chapter 7, the co-signer will have some small protection regarding the collateral during the proceeding, but only because the Creditor can�t go against the property of the estate.  After a Chapter 7 is over, the Creditor will proceed against the co-signer personally.

Can I file a personal bankruptcy and not have it affect my business?

 If you own your own business, the business is a part of your assets.  If it is worth very much, it may be property of the Court.  If your business is incorporated and files bankruptcy, it won�t affect you because the business does not own you.

Can Bankruptcy stop foreclosures, wage assignments, help me get my license back from an uninsured accident, stop evictions, a judgment, and remove a lien? Yes.

What will happen to my bills?

When you file a bankruptcy, a Court order goes into effect that keeps Creditors from legally collecting from you.  When you are discharged (i.e., the bankruptcy is final), the Creditor "charges off" the debt and gets a tax deduction for the loss.  The bill is not paid, and the debt shows up as a bankruptcy charge-off on your credit report.  Some Creditors will attempt to get around the law and will continue attempts to collect after the bankruptcy is filed.  They can be sued for this, but you need to prove they did it.  One of the best methods is to record their call and then surprise them in Court with it when they deny ever making the call.  Most Creditors that ignore the law will never send you letters or anything on paper after you file, but they may make phone calls hoping that you will pay anyway. 

What if I keep getting bills?

You will continue to get some bills from bankrupted debts after you file.  What happens is that the Bankruptcy Court sends out notices to the addresses that you give to them (that is why correct addresses are so important), but some Creditors never get these notices and continue to bill you or maybe you listed the original creditor and that account has been sold or transferred to a collection agency or attorney.  You should make copies of your original hearing notice (Notice of Commencement of Bankruptcy).  If you get a bill or other dunning letter from a Creditor, send them a copy of the bill and the notice.  Some Creditors will continue to send bills even if they receive notice.  It may be that their computer can�t stop sending out the bills, or they may simply be ignoring the stay hoping that you will pay anyway.  If this becomes a problem, and you have proof that a Creditor is doing this on purpose, contact my office.

Do I have to pay my bills during the Chapter 7 or 13?

 No.  Don�t pay any bill (except a home or car note you wish to keep and your post-filing utilities) until after you file a reaffirmation in a Chapter 7.  Don�t pay any payment in a Chapter 13 unless it is the regular monthly mortgage payment or car payment, and the 13 was filed to catch up the arrearage.  A stay is a federal Court order to stop.  If the item is secured, your overdue payments will continue to add up while you don�t pay on the item.  However, the Creditor can't proceed against the collateral until the stay is terminated.  Often, the Creditor will file a motion to terminate the stay after the bankruptcy is filed.  Bankruptcy stops your obligation to pay, but the Creditor may still have a lien and rights in the property.  You often quit paying for items when you file so that you have time to decide if you want to reaffirm, redeem, or surrender.  I have rarely ever had a bank refuse to reaffirm a debt, but you don�t want to make payments if they aren't going to reaffirm with you and they only want the property.  In some rare cases, with people who are never going to repay, the bank may refuse to reaffirm.  In these cases, the bank only wants the property back.  Also, some credit unions may refuse to reaffirm a car or mortgage unless you also reaffirm their credit cards or other loans or accounts you have with them.  In cases like this, you may want to redeem (pay one lump sum) the property instead.  That is why you don�t want to make any more payments just before or after you file.  You can take the time to negotiate your options.  You don�t have to be caught up on your payments to reaffirm, but some banks may request it�and all of them want it. 

Who notifies the Creditors and bill collectors?

  After the bankruptcy petition is filed, the Court mails a notice to all the Creditors listed in the schedules.  This usually takes 1-2 weeks.

Do I have to go to Court in a Chapter 7?

 Not exactly, but you will have to attend a hearing presided over by the bankruptcy Trustee.  This hearing is called the 341 Hearing (Meeting of Creditors).  At this hearing, the Trustee (who is usually an Attorney) will ask questions of you, under oath, regarding the content of your bankruptcy papers, assets, debts, and other matters.  It is very much like a deposition, not like a trial.  If you can�t attend (example: if you are in the service overseas), you may be allowed to have a family member or other next of kin testify on your behalf. The Trustee is not the judge.  He is there to take any assets from you, if he can, and to check the accuracy of your paperwork.  The Trustee represents the creditors, not you.  You generally only have to go to actual Bankruptcy Court where the Judge presides only if there is a dispute in your case with the Trustee or one of your creditors. Sometimes the Judge may call a hearing in your case depending on certain circumstances.  I will advise you if you actually need to go to Court.

Where is my 341 hearing?

 Your 341 hearing is always at the Federal Court closest to you. 

In  metro Detroit, your 341 hearing will be held in the basement at 211 West Fort Street, Downtown Detroit at the corner of Fort Street and Washington. Always give yourself ample time for parking.

What do I wear to the hearing?

The 341 meeting is a Federal Court proceeding so dress and act appropriately.  Don�t wear cut-offs or jeans with holes in them and don�t wear sandals.  Suits are not required, but dress properly for a hearing in Federal Court. Children are not supposed to be in the hearing room.  Do not borrow and wear flashy jewelry.  This is not the time to brag about how rich you are or how much you own.  The Trustee is looking for assets to take from you.  He is not your friend.  He represents the persons that you owe.  You must report in your bankruptcy papers everything that you own and it�s real value, but don�t brag about your income and possessions�especially if you don�t have any.  Save that for when you want to impress the opposite sex in bars.

Do you show up with me at the hearing?

 Of course!  I will take care of you, and hold your hand through the process.  I don't just file the paperwork.  However, there is some work that you must do on your own and, if you read this manual thoroughly, you should be able to make the most of your bankruptcy without too much help from us.

When should I file tax returns if I am going to file bankruptcy?

If I file in December do I keep my refund?  If you are considering filing a bankruptcy, you should file your tax return as early as possible.  Get your refund before you file.  If you do, you will generally keep your refund no matter how much it is.   If you file in January, you may have to wait for some time after you get your refund back.  You will be asked when you got your refund and how you spent it if you got a large refund. Be sure to list any anticipated tax refund in your bankruptcy papers so that I may exempt it if possible.

What will happen to my house and car?

 Usually, you keep them.  If your equity is less than or equal to your exemption, you keep the property.  You are allowed to keep a certain amount of equity and property in bankruptcy.  When I prepare your bankruptcy I will tell you if you are at risk of losing property.  At the time of filing, all your property that is not exempt belongs to the Court.  The idea is to exempt it all so that you keep it all.

Do I have to keep up the insurance on my vehicle?

Will my rates be affected or will I be dropped? In Michigan, the law requires you to have PLPD or No-fault insurance at a minimum.  PLPD stands for personal liability and property damage insurance. If you are financing or leasing a motor vehicle, your financing contract will more than likely require you to maintain full-coverage insurance.  This protects the finance company (lien-holder) in case the vehicle is in an accident or stolen.  If you fail to keep full coverage insurance on your vehicle and it lapses, the Creditor may petition the Court to get relief from the Bankruptcy stay to allow them to pick-up your vehicle-they will argue that you may get in an accident or it may be stolen and you could just walk away from it-with them taking the loss.  Most insurance companies are happy to keep you if you simply pay on time and have few claims.  We can generally say that if you pay your premiums on time and keep the same company, probably nothing will happen.  However,  this may be a good time to compare rates with other companies�especially if you fear you may be dropped or raised because you listed your insurance company as a debt (or if you are bankrupting an accident claim). 

Can a Creditor be forced into a reaffirmation?

 No, a Creditor can�t be forced into a reaffirmation. Can a Creditor be forced into redemption (a lump sum payment for fair-market value)?  Yes, a Creditor can be forced into redemption.

A reaffirmation is an agreement to pay the payments on the loan, and it is very rare for the Creditor to refuse a reaffirmation.  If the bank does not agree to a reaffirmation, it will usually take a large loss from selling the vehicle at an auction, or the house in a foreclosure.  It may even violate federal lending rules by refusing to reaffirm on a home mortgage.  A bank may be able foreclose or repossess, regardless of whether you are in a bankruptcy.  If they have started a foreclosure, the filing of the bankruptcy stops the foreclosure but, in a Chapter 7, the bank may file a motion with the Bankruptcy Court and ask to foreclose anyway.  If a Chapter 13 offers a good repayment plan, the Court will not approve any foreclosure.  If the bank is adamant that it wants the house or car back, it may do so in a Chapter 7 and take a loss.  Normally, the bank will rethink their decision and give you one more chance through reaffirmation, but no one can force them to reaffirm.

A redemption is an agreement to pay the bank what the security is worth in one lump sum.  They cannot refuse the redemption.  If you wish to redeem a car by paying a lump sum, contact my office.

Can I choose which Creditors I repay?

Yes, you can reaffirm to pay one Creditor, but not another, after the bankruptcy.  By doing this, you can keep one car, but not another, or keep a credit card, but let a lemon auto go back.  A Creditor will have to agree to the reaffirmation, but few refuse.  Of course, we highly recommend you don�t reaffirm unsecured debts.

Can I revoke my reaffirmation?

 Yes, but it must be revoked or rescinded  within 60 days of the 341 hearing or before discharge, whichever comes first.  It should be revoked in writing and sent by certified mail so you have proof. Or you could retain me to do it for you and I will file the rescission with the Bankruptcy Court and docket a copy in your official court file.

I want my house or car to go back.  Will I lose it immediately?

  No.  You will normally have until the 341 hearing or a couple months thereafter to return your car and owe nothing until then.  Use that period of time to look for another vehicle you can afford.

If you choose to let your house go back, you will normally have about a year to live in it rent free.  The shortest period for a foreclosure is about 6 months, and I have seen it take up to 2 years.  Remember, a repossession will normally do a lot more damage to your credit than a bankruptcy.  Filing a Chapter 13 to catch up on your payments (within 2 years) is one way to keep your home.  The only good reasons to let your house go back are that you have a large amount of negative equity in it or that it is an overwhelming burden.

 Will I lose my 401(k) or retirement fund?

 No, your retirement is completely exempt and protected under both Michigan (state) and Federal (United States) law.  Other states have other exemptions to protect retirement plans.  However, you should talk to a qualified Attorney to get his opinion.  The United States Supreme Court has held that pension plans, 401(k) plans, and other �ERISA-qualified plans� are generally excluded from the Bankruptcy Estate under 11 U.S.C. sec. 541(c)(2).  Unlike 401(k) plans, IRA accounts are not ERISA-qualified plans.  However, in Michigan and most other states, an IRA may be excluded from the Bankruptcy Estate or otherwise exempt because of a state statute.  Some Bankruptcy Court judges have held that an IRA may be partially exempt under 11 U.S.C. sec. 522(d)(10)(E).

I was just sued and they have just attached my paycheck or bank account what can I do?

  If property was taken from you just before filing bankruptcy, and it was over $600, the creditor can sometimes be forced to give it back.  I will charge a fee of 50% of the amount I am able to recover from the creditor, if any.  Liens on property that were from a lawsuit can be removed.  Garnishments and foreclosures can be stopped.  The sooner you seek help, the sooner you can stop the procedure.  It is important to seek help as quickly as possible. 

What happens if I quit making my payments in a Chapter 13?

Your Chapter 13 will be dismissed from Court, and you will go back to owing the original debt and being unprotected.  However you should be able to re-file.  In cases of multiple repeat filings, however, the Court may dismiss the case with a 180 day bar (prohibition) to re-filing under any Chapter.  This is rare and usually occurs when it is obvious to the Court that you are abusing the privilege that a Chapter 13 Bankruptcy offers.

Can I reduce my monthly credit card or automobile payments in a Chapter 13?

Yes, a Chapter 13 can reduce your monthly credit card and automobile payments.  It can also reduce your interest rates to 12%, 10%, or even 0% on tax, secured, and unsecured debts. Note that you cannot force your mortgage company to take less per month than the normal monthly payment in your mortgage. You can, however, pay the arrearage (amount you are behind) over 36 months at 0% interest.

Do I have to pay back 100% of what I owe in a Chapter 13?

No.  You can repay as little as 10% to your Creditors in a Chapter 13.  The amount you pay to your unsecured creditors depends on your ability to pay (i.e. your net disposable income vs. your reasonable monthly expenses).  This is the "best interest of the creditors" test.  Your plan must be proposed in good faith, it must not be a disguised Chapter 7.  The liquidation analysis requires you pay the amount, if any that your creditors would receive if your case had been filed under Chapter 7 and your estate were liquidated.  Your Chapter 13 must pay at least what a Chapter 7 would have paid.  Certain plans may pay much less than 100% if that is all you can afford.  The Trustee likes to see a 100%, 36 month plan.

Can I pay some Creditors and not others in a Chapter 13?

In a Chapter 13, you can pay the secured Creditors more than the unsecured Creditors and the priority debts differently than the secured Creditors.  You can�t (shouldn�t) discriminate and pay one unsecured Creditor differently than other unsecured Creditors.

Should I try a Debt Counseling Service instead of filing bankruptcy?

How do Debt Counseling services work?  "Debt Counseling Services" are often high-interest loan companies.  Other times, they are agencies that pocket 10-40% of the monthly money that you pay to them as fees for their "counseling".  Most of these services will combine your bills and send a partial payment to each bill that you owe.  Usually there best interest are not for you but for their ultimate client in many cases, the credit card companies. Your credit will be listed by the credit card companies as delinquent for sending in partial payments, and the reduced amounts sent in may not even cover the interest that a debt charges.  These "Counseling Services" are often simply rip-offs that pretend to be charities or helping agencies. They are not using the law to your advantage and have no real "power" to deal with your creditors.  Filing a Bankruptcy petition puts the ball in your Court.

If you pay a debt counseling service $100 a month, what happens is that they take up to $40 for themselves and then send your Creditors $60.  Your bills fall even farther behind. Eventually, Creditors file lawsuits and you are forced into bankruptcy anyway.  Very few of these "repayment plans" work and over 90% fail, leaving you worse off.  Another scam is that some debt counseling companies will charge thousands of dollars by promising to find you a consolidation loan as a loan broker or mortgage broker.  These loans end up being at a high-interest rate or they pocket your money and never give you the loan.  Others strip the equity from your home.  Whatever method used, "Debt Counseling Services" are often scams meant to take your money when you are already in trouble.

Also be wary of using services that claim to �repair� your credit file.  Some may attempt to create a new credit file by getting a new social security number.  Changing your identity is a felony, especially if you steal another person�s identity.  Creating a false identity and using it may also be a felony. 

How long should I keep a copy of my Bankruptcy? 

You should keep a copy of your bankruptcy, with your tax papers, for at least 7 years.  You are only required to keep receipts 3 years by the tax department�after 3 years they have the burden of proof�but keep them for 7 years anyway. 

When will I be able to get credit again?

Normally, you will qualify for a home mortgage at normal rates within 2 years.  You will be able to get other credit within 6 months to a year.  Your ability to get credit is based on your income and your history of repayment, as well as the security you offer.  You should be able to purchase a car or house if you reaffirm one or two debts and pay for them on time after your discharge.  You always have to be able to afford what you are buying on credit or meet credit standards.  You will have to reestablish your credit by paying on time after your filing.  There are companies that lend to you while you are in bankruptcy and just after bankruptcy.  722 Redemption Funding will sell you a car at wholesale price (at about 25% interest), and they will also finance the redemption of some cars at the wholesale book value. 

Will my employer and landlord find out about my bankruptcy?

 Bankruptcy petitions are public records; however, under normal circumstances, no one will know you filed a bankruptcy petition unless you tell them.  If your employer or landlord is a Creditor, it must be listed as a Creditor on the schedules, and it will receive notice of the bankruptcy proceeding.  In some states, Chapter 13 Debtors are required to make payments through wage garnishment, which means the employer will learn about the bankruptcy.

Will this affect my getting an apartment? 

Many of the larger apartment complexes are owned by banks, and banks tend to grant leases according to credit bureau reports.  This may affect you.  Small landlords will call former landlords and may not check credit reports. 

Can employers discriminate or fire me?

No.  There is an anti-discrimination section of the Bankruptcy Code that prevents employers and the state of Michigan from denying you licenses or discriminating against you when hiring.  But do yourself a favor:  Keep it to yourself.  They generally won�t know unless you tell them.

What are bankruptcy crimes? Do they exist?

Yes.  Criminal statutes related to bankruptcy can be found at 18 U.S.C. sections 151 to 157.  Examples of bankruptcy crimes are knowingly and fraudulently concealing assets, lying under oath or on bankruptcy schedules, and knowingly and fraudulently filing a false proof of claim.  Bankruptcy fraud can also be used to support a RICO claim.  Bankruptcy crimes are often the result of claiming that you don�t own property that you do own or that has been transferred to conceal it from the Court. 

Do I have to disclose all of my assets?

Yes.  If you knowingly and fraudulently conceal an asset from the Court, you have committed a felony and you can be fined up to $5000, imprisoned for up to five years, or both.  However, this is rare and normally comes up in only the worst cases.  In addition, the Court can deny discharge, or dismiss or convert your bankruptcy proceeding.

Can I run up charges on my credit cards just before filing?

The official answer is �No�.  Many people do make some minor charges on their charge cards just before filing.  (Read between the lines here.)  Charges of over $1000 on any one card within 60 days before filing are presumed to be fraudulent and non-dischargeable.  Cash advances totaling $1000 or more within 60 days of filing are non-dischargeable.  Charges to an account more than 60 days before filing are presumed proper regardless of the amount. 

There is no reason to pay any further on debts that you are planning to avoid in bankruptcy.  Normally, you should file as soon as you can, but it won�t matter if you pay the bills or not before you file.  It doesn�t matter if you owed $10,000 or $10,000,000 before you filed or whether or not you paid on time before you file bankruptcy.

We suggest to clients that they not charge over $1000 on any one credit card or loan within 60 days before filing, but you certainly don�t want to pay any more on the cards, and you may want to take one last small, reasonable trip to the mall.  If you charge more than $1000 within that 60 day period, the credit card company may require you to pay the full amount owed to them.  So, the simple answer is not to charge anything for 60 days before you file.  We have had clients charge over $5000 dollars, and wait 90 days before filing, with no problem.  However, be aware that �fraud� is open to judicial discretion.  The anti-fraud statute also looks at whether or not the charges were for luxury items or normal purchases:  A fur coat or jewelry would be more likely to be seen as fraudulent than school clothes for the children, gas, and groceries.

Can I give property away just before filing? 

Gifts of property over $600 just before filing are improper, and the Court can go after that property and the person you gave it to. Gifts under $600 are not improper. 

Can I bankrupt my utility bill?

  Yes, but they may make you pay a deposit equal to one month's service.  If you include utilities in your bankruptcy, you need to immediately advise your utility that you have filed and tell them your case number and the date you filed. If you simply file a Chapter 7, don't pay, and don't contact them, you may end up having your service turned off.  It may be a month before the utility finds out that you have filed, so if you list a utility advise them immediately.

Can bankruptcy stop a lawsuit?

 Yes, but it will not stop criminal cases or criminal restitution.  Criminal restitution is non-dischargeable.

Can I get my drivers license back?

 If you have lost your license due involvement in an accident where you had no or too little insurance, filing bankruptcy will restore your license.  I will notify the proper authorities for you such as the Secretary of State and the Michigan Bureau of Driver Improvement. You may have to wait until your case has been discharged before the Secretary of State will reinstate your drivers license.

What are predatory lenders?

Certain Lenders don't care if you ever repay them not:  They lend not on your ability to repay, but instead based on the equity that they can steal from your home or in their ability to overcharge you and then sell the very profitable loan to another lender.  When you fail to pay, they foreclose to collect.  They charge prepayment penalties, higher interest, and upfront loan costs to get you the loan.  They often use unfair lending tactics, like flipping and packing, to increase income and then don't keep the loan but sell it to another company.  They target poor, elderly, minorities, and the uneducated in advertising and overcharge heavily so that the loan can never be paid off.  Home improvement companies will sometimes use these mortgage companies to process loans for home improvements that are poorly made (if they are made at all), and the result is that you have signed away your home for second-class home improvements.  Predatory Lenders often overcharge for filing fees, reporting costs, and closing fees, and then fail to report the charges.  If you are lucky, you will be able to sue them for truth-in-lending violations and, perhaps, have a free home.  The more they steal or overcharge you, the more proud they are of doing it to you.

I owe 125% of my mortgage to the predatory lenders that took all the equity in my home when I refinanced.  What can I do?

In a Chapter 13, you may be able to reduce or remove the lien on a property and repay only the amount that the house is worth.  This is called �lien stripping�.  However, you can only do this in a Chapter 13.  You can�t lien strip in a Chapter 7 bankruptcy except by redeeming the property under 722 or removing household goods and judicial liens under 522 (f).  You can, however, lien strip mortgages and consensual liens, to the extent that they are unsecured, in a Chapter 13 and then convert to a Chapter 7.  By doing this, you would pay 100% for the house mortgage that is really secured.  In other words, you would only repay the value of the home to the mortgage holder and 10% on the other 25% in the Chapter 13.

Contact Attorney Walter Metzen for more information on the following Bankruptcy Lawyer topics:

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I have a small retirement account-is it exempt?

Normally retirement accounts can�t be taken by creditors or the bankruptcy court.  The question is whether or not this is a retirement account just calling it a retirement.  Account does not make it one.  Real retirement accounts cant be assigned or attached. If it can be spent by you, assigned, or attached it isn�t a retirement account for purposes of the exemption.   If the stock is worthless you can list it and if the trustee (which is what the trustee normally does with worthless property) abandons it then it will belong to you.  However at the moment of filing your Chapter 7 bankruptcy all your property technically belongs to the Trustee.

I notice that you have a few more creditors like DTE Energy, or some attorneys that I don't owe, or the creditor addresses are different, Why? 

 This is just me covering all the bases and insuring that you discharge every possible debt and I sometimes know where the creditor wants the notice mailed. I also often list known collection agencies and collection attorneys who may later pick up the account.