Many of my bankruptcy clients in the Detroit, Michigan area have some percentage of business debt alongside their personal, consumer debt. As the job-market has soured here in Michigan, many people have tried to make their own opportunities where opportunities for traditional employment have failed, setting up LLCs or other businesses to try to make a go of it independently. Obviously, I don’t hear from those who succeed in these ventures, but I have heard from those who haven’t, whose ideas for insurance sales, landscaping services, trucking, towing, and other services simply haven’t panned out. On some occasions, these business ventures have been undertaken with personal credit-cards already in use for strictly consumer reasons. In such cases, there is no question that the individual has personally “guaranteed” the debt and may therefore discharge it in a personal Chapter 7. On other occasions, however, especially where an LLC or other corporate form has been set up by the individual and corporate credit-cards utilized, it is sometimes less clear that the individual is personally liable for the debt rather than the corporation.
I have written about the role of business debt in Chapter 7 bankruptcies before on this blog, however. The situation I am discussing here is the situation that arises when the individual has indeed personally guaranteed non-consumer, business debt and when that debt is larger than the individual’s personal debt, or, at least, when the amounts are very close. In that situation, there is a danger that the trustee appointed by the court to oversee the bankruptcy case may file a motion to dismiss the case entirely. The Bankruptcy Code defines “consumer debt” as “… debt incurred by an individual primarily for a personal, family, or household purposes.” Courts have interpreted this definition widely, but it is important to keep the proportion of debt that has been incurred for the purpose of forwarding an existing business enterprise in mind in particular.
If you are a southeast Michigan-area resident with questions about your business or other debt, please contact me at (248) 246-2187 or john@hillalaw.com to schedule a free, initial consultation. Together, we will determine whether or not a Chapter 7 bankruptcy is the best way to eliminate your debt.
Categories: Bankruptcy · Bankruptcy Process · Business Debt · Chapter 7
Tagged: Bankruptcy, Bankruptcy Planning, Chapter 7, consumer debt, detroit, Michigan, non-consumer debt
In Detroit, Michigan, where I practice bankruptcy law on behalf of consumers, and every other jurisdiction in the United States, it is true that, once you file a petition for either Chapter 7 or Chapter 13 bankruptcy, all collection attempts against you must cease. The reason for this is that, as I’ve discussed in many of my posts on this blog, upon the filing of the bankruptcy petition, an “automatic stay” goes into effect against all of your creditors’ collection attempts. This automatic stay, which originates in Section 362(a) of the US Bankruptcy Code, prevents creditors from calling, sending bills or letters, garnishing your wages or bank accounts or state income tax refunds, or foreclosing upon or repossessing your property. It is a sweeping stay that is intended to freeze all of your incoming and outgoing assets and liabilities so that the bankruptcy court can properly adjudicate the bankruptcy process.
Most creditors, upon receiving notice of the bankruptcy, do indeed stop collection attempts cold. When the bankruptcy petition is filed, notice is sent both electronically and by mail to every creditor listed in the petition. Creditors who are inadvertantly not listed in the petition may be notified by you or your attorney even after the petition is filed, and, generally, even at that point, they will understand that they need to freeze all collection efforts.
Every once in a while, though, a creditor (usually one of the countless, dubious collection agencies across the country) will ignore the notice and continue harassing debtors who have filed for bankruptcy, even after having been informed of that fact and provided with the debtor’s case number and filing-date. What then?
At that point, there are a number of remedies available to you and your attorney. Primarily, under Section 362(k) of the US Bankruptcy Code, these violations of the automatic stay may be actionable. Likewise, such efforts may also be actionable as contempt of court. What that means is that your attorney may file a motion against that creditor in the Bankruptcy Court which may result in an award of $100 per contact attempt for you, as well as your attorney’s fees paid by the creditor.
In short, the automatic stay against collection attempts is one of the many protections and advantages the law offers those who file for bankruptcy. If you are considering filing for bankruptcy, please contact me at (248) 246-2187 or john@hillalaw.com to schedule a free, initial consultation.
Categories: Bankruptcy Basics · Chapter 13 · Chapter 7 · Eviction and Bankruptcy · Garnishment · Michigan
Tagged: automatic stay, Bankruptcy, Chapter 13, Chapter 7, detroit, Michigan, southfield
September 28, 2009 · 1 Comment
When you file bankruptcy in Detroit, you have decisions to make. Do you file a Chapter 7 bankruptcy or file a Chapter 13? Will you keep property (like your house or car), or will you surrender it? Are there special issues in your bankruptcy case that need to be addressed?
You probably won’t think of what you’ll wear to your bankruptcy hearing until a day or two before the hearing. And while there are rules about other bankruptcy issues, there really aren’t any concerning what you should wear to your hearing. As with most other decisions you make, use good judgment. Here are some things to keep in mind when you make this decision:
- While you are going to court, the judge will not be present. Instead, a bankruptcy trustee appointed by the United State Trustee’s Office (a division of the Department of Justice) will preside over your hearing. This isn’t as formal as testifying before a judge or jury.
- You are in bankruptcy. You have financial problems. Overdressing, while not prohibited, looks a bit odd. Coming in a suit and tie, for example, is a bit over the top. Let you lawyer be the one in the suit.
- You are in bankruptcy. You were required to list all of your assets on your bankruptcy paperwork. That includes jewelry. I’ve seen trustees cross-reference a debtor’s personal property schedules with what’s on a woman’s hand. If there’s a large diamond engagement ring on her hand but not on her bankruptcy schedules, most trustees will notice. Note: I am not telling you to hide anything. I am telling you that you should notify your attorney immediately if you forgot to list property on your schedules. And wearing jewelry you didn’t list on your schedules is a really bad idea.
- You want to show respect to the court, but, at the same time, blend in. There’s a happy medium between dressing like you’re going to work in the yard all day long and dressing like you are going to a funeral. Pick something somewhere in the middle. You don’t want to look like a slob, but you don’t want to look affluent, either.
- Don’t dress immodestly. You’re not at the beach or at a night club. Again, the goal is to blend, not to stick out (pardon the pun).
The goal at your hearing is to show respect while, at the same time, not look out-of-place. While what to wear to your bankruptcy hearing isn’t one of the more important issues in your case, it still deserves some attention. Don’t put unnecessary obstacles in the way of your bankruptcy case being a success.
Written for the Michigan Bankruptcy Blog by Charleston Bankruptcy Lawyer, Russell A. DeMott.
Categories: 341 Hearing · Chapter 13 · Chapter 7 · Uncategorized
Tagged: 341 Hearing, Chapter 13, Chapter 7, meeting of creditors, Michigan
Employers may not discriminate against employees who have filed for bankruptcy under Section 525 of the Bankruptcy Code. This applies to either private employers or governmental employers under different sub-sections of 525, but, in either case, employers cannot discharge, fire, or otherwise discriminate against employees who have filed for Chapter 7 or Chapter 13 bankruptcy. (This is, by the way, the same section of the Bankruptcy Code that forbids lenders from denying student loans to applicants on the basis that they have declared bankruptcy.)
Therefore, if your current employer discharges you because you have declared bankruptcy, that employer is in violation of Federal law. However, any action taken against filing employees must be demonstrably related to the bankruptcy. If this can be proven, an employee who was suffered workplace discrimination may have a private cause of action.
What is less cut-and-dry is the denial of employment by prospective employers. When applying for a new job, many potential employers these days request your authorization to pull and inspect your credit-report. This section of the Bankruptcy Code has been interpreted by courts to apply generally only to current employers and not prospective employers.
If you are seeking a Detroit-area Michigan bankruptcy attorney with whom to discuss your situation, please contact me to schedule a free, initial consultation.
Categories: Chapter 13 · Chapter 7 · Employment discrimination · Judicial Decisions · Michigan · Student Loans
Tagged: Chapter 13, Chapter 7, detroit, discrimination, employment, Michigan
Mobile or manufactured housing is handled roughly the same way non-mobile housing is handled in a Chapter 7: it is property that is possibly securing debt the same way a standard mortgage or even car loan does and is likewise property that may be foreclosed upon if payments for the debt that it secures fall behind. The difference is, naturally, in the possibility that this particular type of home may, as its name implies, be mobile.
In a bankruptcy filing, the question for any real estate is whether it does or does not qualify for the homestead exemption available under the Federal Bankruptcy Exemptions and under most state bankruptcy exemptions to varying degrees. For a mobile home as with any home, the question is whether or not the home is the filing debtor’s primary residence. That is, does the debtor actually live in the property at the time the petition is filed? If so, any equity in the mobile home is likely covered by the homestead exemption just as with non-mobile real propety that is the debtor’s primary residence.
A further underlying issue with regard to mobile homes is whether the debtor also owns the underlying land upon which it sits. If so, a certain percentage of this land in combination with the mobile home itself is covered by the homestead exemption. If the underlying land is rented rather than owned, then it is the mobile home alone that is valued and exempted in the bankruptcy petition, while the land must be disclosed on the bankruptcy petition as the subject of an executory rental agreement, much like an apartment. It is important, therefore, to give your attorney all of the information he or she requires to determine your level of ownership in the property so that the various components—mobile home and the underlying land upon which it sits—are both valued properly and in the right amounts and listed properly in the bankruptcy petition.
Further, the manner in which the mobile home is listed in the bankruptcy petition may depend upon such details as whether or not the wheels have been removed from the mobile home. (State law governs this determination, generally).
If you have questions about your mobile or non-mobile home and how it might be handled in the bankruptcy process, please contact me to schedule a free, initial consultation. Together, we’ll work out the best strategy to protect and preserve your home.
Categories: Bankruptcy · Chapter 7 · Home Mortgages and Bankruptcy · Michigan · Uncategorized
Tagged: Chapter 7, foreclosure, homestead, homestead exemption, Michigan, mobile home, mobile home in bankruptcy, property
I have touched upon this issue a few times before on this blog, but I feel, given the number of questions I receive from potential clients on this topic, that it is worth going into again here. It is, in short, possible to keep your home if that is your desire in a number of ways through a Chapter 7 bankruptcy. However, there is no inherent right to keep real property through a Chapter 7. That is to say, if you want to keep your home and file for Chapter 7 bankruptcy, you must take certain steps to ensure that this outcome is likely.
There are a few specific circumstances under which a home may be retained through a Chapter 7:
First, if you own your home outright, it may certainly be retained through the bankruptcy provided there are enough exemptions available to exempt your equity from the bankruptcy estate so that the court-appointed trustee overseeing your bankruptcy process cannot liquidate it (i.e., sell the home off) for the benefit of creditors whose debts are otherwise being discharged by the bankruptcy. Here in my area of southeast Michigan and in the Detroit area in particular, there are few issues arising from this set of circumstances: while the homestead exemption providing for the exemption of real estate that is the debtor’s primary residence is not stellar, it is often sufficient to cover many of the older homes in my area.
Second and more problematically, if you are paying on a mortgage or land contract and are not in any arrears on your payments, the home may be retained in a couple of ways. One, the debt may be “reaffirmed” with the loan lender. “Reaffirmation” means that you are agreeing to continue paying on the original note of sale for the home (or a revised version of it) after the bankruptcy discharge is granted even though that particular debt would otherwise have been discharged in the bankruptcy. Most lenders will agree to sign such an agreement, provided that you are not behind in your payments. However, if you are behind in your payments or EVER fall behind in your payments, the lender generally retains the original contractual right to foreclose. If that happens after your discharge is received, you will remain liable for the amount owed under the original note of sale and/or any applicable deficiency judgments. As a result, signing a reaffirmation agreement is extremely tricky and is something that I, personally, will agree to only under very favorable circumstances to my clients. I would highly recommend consulting a knowledgeable bankruptcy attorney before signing any such agreement.
Third, if you are paying on a mortgage or land contract and, again, are not in any arrears on your payments, you may, depending on your state’s laws, opt to retain the home and continue making payments on it without signing a reaffirmation agreement. The viability of this option will vary from state to state. Here in Michigan, it is a viable option so long as you remain current on your payments—forever. Home mortgage lenders cannot foreclose on your home and evict you if you are current on your payments. Some lenders, however, will stop sending monthly payment statements, etc., after a bankruptcy if you have elected this option. Again, consulting a knowledgeable bankruptcy attorney before making such a decision is a must.
The bottom line is that, if you want to retain your home through a Chapter 7 liquidation, you must be current on your payments at the time of the bankruptcy filing, through the bankruptcy process, and beyond the bankruptcy discharge. Otherwise, there is a likelihood that the automatic stay will be lifted with regard to that property and foreclosure proceedings initiated before the bankruptcy is even complete.
If you have questions regarding bankruptcy and your real or personal property, please contact me to schedule a free, initial consultation.
Categories: Bankruptcy · Bankruptcy Planning · Chapter 7 · Home Mortgages and Bankruptcy · Michigan · Reaffirmation Agreements
Tagged: Bankruptcy, Chapter 7, detroit, home, homestead, Michigan, mortgage, property, reaffirmation
Following a Chapter 7 bankruptcy, you may repay any debt you choose regardless of the fact that it has been formally discharged in bankruptcy. Therefore, debtors with outstanding debts to friends or family-members for personal or other types of loans do not lose the ability, first of all, to repay those loans. The bankruptcy affects only that friend or family member’s ability to collect on the debt short of the debtor’s voluntary repayment of the debt. Prior to the filing of the bankruptcy, however, such repayments, in certain cases, may affect a debtor’s ability to file for bankruptcy within a desired timeframe.
Many debtors wish to pay off personal loans entirely so as to maintain a good personal relationship with the friend or family-member who made them the loan. It is not generally the case that these sorts of outstanding debts are those that have driven the debtor to consider bankruptcy in the first place. Rather, they are often secondary steps taken to avoid bankruptcy or other drastic actions in the face of the general hardship of a job-loss, medical situation, or divorce. Someone did them a favor, in other words, and they are reluctant to appear to be biting the hand that fed them.
Nevertheless, as I’ve written elsewhere on this blog, prior to the filing of the bankruptcy petition, there is a 90-day period of time known as as the “preference period,” in which any payments larger than $600 made to any one creditor are scrutinized by the court-appointed trustee overseeing the bankruptcy case to determine whether a “preferential transfer” has been made. Such “transfers” are those that “prefer” one creditor over another, and, if the trustee has determined that such a transfer has occurred, he or she may reclaim those transferred funds and/or dismiss the bankruptcy case entirely.
When a payment of this sort has been made to an “insider,” the preference period is much longer. An “insider” is classified, basically, as a friend or family-member, among other things. Any payment over $600 made to an “insider” within one year of the filing of the bankruptcy petition may be considered a preferential transfer.
Thus, if you have an outstanding personal loan that absolutely must be repaid before filing for bankruptcy, it may mean holding off on filing your petition for an entire year. In individual cases, there may be good reasons to elect to make this repayment and delay filing for bankruptcy for that amount of time; in other cases, it may be better to simply file and “voluntarily” repay the loan in smaller incremements after the bankruptcy discharge is granted.
In any case, if you are considering filing for bankruptcy and have questions about personal or other loans that you might repay prior to filing, please contact me and schedule a free, initial consultation. I will help you uncover issues such of these with each of your individual debts and, together, we can determine whether bankruptcy is an appropriate solution for you.
Categories: Bankruptcy · Bankruptcy Basics · Bankruptcy Planning · Bankruptcy Process · Chapter 7
Tagged: attorney, Bankruptcy, Chapter 7, detroit, Michigan, personal loan, preference, southfield
While it is true that filing for bankruptcy is a serious blow to anyone’s credit-report, it is no longer completely true that, after a bankruptcy, it is impossible to rebuild your credit standing within a reasonable amount of time. The amount of time that rebuilding your credit actually takes varies from person to person, naturally, but, for many, filing for bankruptcy is actually the first step on the road to a renewed credit standing rather than the last, particularly if you are one of those whose credit health is in such a state of disrepair that a bankruptcy discharge actually is an improvement of sorts, in that it allows some positive progression to be made rather than a neverending cycle of minimum monthly charge payments, late-payment fees, collection lawsuits, and garnishments.
It is an unavoidable truth that a bankruptcy will remain on your credit-report for up to 10 years, of course. The bankruptcy itself will be an obvious detriment for several years, but, eventually, it will be a detriment for future credit lenders examining your report to take into the context of, first, your report as a whole and, additionally, your baseline FICO score. In other words, the bankruptcy can balanced out somewhat by the steps you take in the first few years immediately following your bankruptcy discharge to rebuild your credit.
These steps will be obvious once your discharge is received in that, at least assuming our current credit-crunch magically eases at some point, credit-card issuers and other credit-lenders now, in the wake of the deregulation of the banking industries in the Clinton and Bush years, actually target post-discharge bankruptcy filers as what they believe to be a viable market-segment for their business. After your discharge, you will receive credit card and other solicitations fairly shortly. Most of these will be high-interest offers that you should avoid like the plague, generally, but, at some point, an offer will be made that will not look too badly that you may consider accepting in order to begin rebuilding your credit. Naturally, you’ll not want to end up in the same situation again and will want to be sure to pay off any new balances each month, but the opportunity will be there to begin rebuilding your credit the old-fashioned way: through the use of credit. Additionally, for FICO purposes, the bankruptcy discharge itself, which liquidates most of your actual debt, improves your income-to-debt ratio instantly.
Again, since you won’t be able to file for bankruptcy again for a number of years, you’ll need to be extremely careful accepting new sources of credit so that you don’t fall into the same personal crunch that led you to file bankruptcy in the first place. But, unlike in previous decades, when a bankruptcy discharge really did drop a nuclear bomb in the middle of your financial existence for many years, it is now possible to genuinely view a bankruptcy as a fresh start, if you handle it properly and don’t fall back into old habits.
If you have questions about the impact of bankruptcy on your future ability to borrow, please contact me to schedule a free, initial consultation.
Categories: Bankruptcy & My Credit-Score · Bankruptcy Basics · Bankruptcy Planning · Bankruptcy Process · Chapter 13 · Chapter 7
Tagged: attorney, Bankruptcy Planning, Chapter 13, Chapter 7, credit cards, debt, detroit, FICO, fresh start, Michigan, southfield
I began this blog only last December, and, although six months is not a lot of time to assess the effectiveness of anything, one thing that has become clear to me is the number of people interested in very basic information about bankruptcy. The ground-level hows and whys and whens remain a mystery to many people, despite the huge amount of information about bankruptcy available on the internet and elsewhere. The posts I’ve written here that address some of these basic questions are among the most-viewed, far exceeding the readership of my posts addressing very specific issues within the framework of bankruptcy.
Therefore, for the benefit of any new readers who may stumble upon this blog, I’d like to take the opportunity, to point toward some of my previous posts that have touched upon the very basic basics of bankruptcy. Wondering where to get started? Try reading these first, below, first.
Still have questions? Feel free to contact me to schedule a free, initial consultation. I’d be happy to sit down and help you decide whether bankruptcy is a viable solution for you.
Categories: Bankruptcy · Bankruptcy Basics · Bankruptcy Planning · Bankruptcy Process · Chapter 13 · Chapter 7 · Michigan · Uncategorized
Tagged: Bankruptcy, Chapter 13, Chapter 7, credit cards, detroit, hilla, Michigan, southfield
I have tended to write about somewhat more substantive matters on this blog, so far, but the #1 question that potential clients ask me when they call actually is, “How long does bankruptcy take?” What they are often curious about, in general, is what exactly the bankruptcy process entails, how often they themselves will have to go to court, and, in addition, how long all of it will, in the end, take. The answers to these questions are quite different for Chapter 7 and Chapter 13 bankruptcies, so I will describe only the Chapter 7 process in this post.
A Chapter 7 bankruptcy, in general, takes about 4 months from the filing of the petition to the receipt of the discharge. That is the official process, however, and does not take into consideration the amount of time the collection of the necessary information and documentation by the filing debtor and his or her attorney requires up front. That up-front time aside, which can take anywhere from a handful of days to a few weeks, depending upon the level of organization and the assets and liabilities in question of each client. The “official process,” however, begins when the debtor’s attorney has utilized all of that collected documentation to draft the bankruptcy petition. When that petition is filed with the court, it sets into place the Automatic Stay against creditors’ collection attempts. This means that, beginning in the exact moment of the petition’s filing, creditors may no longer call with harassing collection phone-calls, send invoices or other mailings, pursue or collect garnishments, or repossess or foreclose on property. This Automatic Stay remains in place for the entire length of the bankruptcy proceeding.
After the petition is filed, what is usually the one-and-only “court date” for a Chapter 7 debtor is scheduled. This is the “341 Meeting of Creditors,” named after the section of the Bankruptcy Code (Sec. 341) which allows for the meeting. This meeting, which is held, generally, at the Federal Bankruptcy Court in your district (in my own Eastern District of Michigan, Southern Division, it is held on the 3rd floor of the Bankruptcy Court at 211 W. Fort St. in downtown Detroit), is generally very short. Typically, the filing debtor simply meets briefly with the Bankruptcy Trustee overseeing the case and not with a judge at all. The Trustee will ask the debtor to verify his or her identity by producing a Social Security Card and Driver’s License and will then ask the debtor any questions he or she has about the petition. The 341 Meeting is generally an opportunity for creditors to make an appearance on the record and ask questions regarding the debt. For most Chapter 7 debtors, creditors generally do not appear, though it does happen. Once this meeting is concluded, there is a mandatory 60-day waiting period before the discharge is granted. This is, again, an opportunity for creditors to challenge the discharge. Provided that none do, the discharge is granted at the end of the 60 days. If the discharge is granted, all of the petitioners’ debts are discharged and need, then, not be paid. If, for any reason, a discharge is not granted, it is after this 60-day period that the Automatic Stay is lifted and creditors may again renew collection efforts.
Any challenge of any sort at any point along this timeline can complicate it significantly, but, by and large, this is the timeline that most Chapter 7 debtors can expect, particularly those who do not own real estate or other secured property more likely to be pursued by creditors than other personal possessions are.
If you are considering filing for bankruptcy and have questions about the process involved or what steps you need to take to begin that process, contact me, and we can schedule a free, initial consultation to explore your best options together.
Categories: Bankruptcy · Bankruptcy Basics · Bankruptcy Planning · Bankruptcy Process · Chapter 7 · Michigan · What Do I Need to File?
Tagged: Bankruptcy, Bankruptcy Process, Chapter 13, Chapter 7, detroit, Michigan, southfield
