Entries categorized as ‘Bankruptcy Basics’
When you are filing for bankruptcy, it’s all too easy to forget to list a creditor or to discover, after the petition has been filed, a creditor that you did not even know existed. When debts are bought and sold by creditors and collection agencies faster than a credit report can often account for the exchanges, it’s a commonplace phenomenon for a filing debtor to receive, after filing the petition, a collection letter from one of the seemingly endless fly-by-night collection agencies for a debt that the debtor did not know had changed hands. (As a consumer bankruptcy attorney working in a specific geographic area, the Detroit area of southeast Michigan, I am often amazed at the sheer number of these companies that come and go like schools of fish … Outside of a few larger agencies, each petition I file brings a slew of collection agencies I have never seen before and will likely never see again!)
Other times, leaving a creditor off of a listing is just a matter of simple error. No big deal. It happens. I try to avoid such error with my clients by working with them to obtain their latest credit report prior to filing their petitions. Most of the time, this nets all of the creditors swimming around them, and it will usually ensure that at least the original debts owed by my clients are successfully listed in the petition, even if a debt happens to have been recently sold off to some random collection agency.
So long as the error or omission is caught early enough in the roughly 4 month bankruptcy process, it is a simple matter to add a missed or missing creditor to a filed petition. The court charges a $23 fee for such amendments, but it is worth the cost. Although, in a Chapter 7, a non-listed debt will still be discharged, if the creditor has a claim against the debtor for fraud, theft, some willful or malicious act against the filing debtor, or if the creditor would have received funds from the filing debtor’s bankruptcy estate if they had been listed, that debt may not be discharged.
Additionally, it goes without saying that all debts and creditors must be disclosed. When you file a bankruptcy petition, your signature on the petition in several places indicates that you have completely and accurately disclosed all of your assets and liabilities. At the 341 Meeting of Creditors, about halfway through the bankruptcy process, you likewise will swear under oath that you have completely disclosed all of your assets and liabilities. A missing creditor that you are aware of or should have been aware of means that this cannot be true.
It is, thus, very important to work closely—and patiently—with your attorney when filing bankruptcy to ensure that all of the necessary information (especially creditors!) gets included. If your attorney works as I and most other bankruptcy attorneys that I am acquainted with do, you will be required to fill out a lengthy questionnaire at the beginning of your bankruptcy process from which your attorney will create your bankruptcy petition. It is not fun to fill out these questionnaires, but it is extremely necessary. Bankruptcy, like every legal process, is only worth doing if it is done right. It is always worth taking the time and effort up front to ensure that your bankruptcy filing is completely accurate in every way.
If you are a Michigan resident and are considering filing for bankruptcy, please contact me at (248) 246-2187 or john@hillalaw.com to schedule a free, initial consultation.
Categories: Bankruptcy · Bankruptcy Planning · Bankruptcy Process · Chapter 13 · Chapter 7 · Debt Listing · Michigan · What Do I Need to File?
Tagged: attorney, Bankruptcy Planning, Chapter 13, Chapter 7, credit cards, creditors, detroit, Michigan, southfield
As I’ve previously described in various posts to this blog (see here, for example), personal property is primarily at issue in a Chapter 7 bankruptcy, in which the liquidation of your property “funds” the bankruptcy. (In a Chapter 13 bankruptcy, the monthly payments you make to the court from your personal income stream ”fund” the bankruptcy, not the liquidation of your property.) In most cases, the “exemptions” provided for in the Bankruptcy Code can protect most, if not all, of your personal property from liquidation in a Chapter 7, though, as always, this is greatly dependent on the amount and type of property you own.
For bankruptcy purposes, a retirement account such as an IRA or 401(k) is simply a type of personal property, and, as with other types of personal property, such as an automobile, there is an exemption available in the Bankruptcy Code for it. (Actually, depending on what type of account you have, there are a couple of different exemptions available.) Unlike a car or your jewelry, however, the exemptions available for most retirement accounts is not capped at a certain value-level. Under the Federal exemptions, for example, you can exempt only $3225.00 in value for an automobile. Under the same set of exemptions, on the other hand, you can exempt ALL of the retirement funds that are in a fund or account that is exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code.
There are certain exceptions to the exempt status of retirement accounts, particularly if they are subject to the repayment of federal income taxes, or, if using the state rather than Federal exemptions in Michigan, where I practice, if the retirement accounts are subject to a repayment order for child-support or other domestic support obligations.
But, in short, if you are considering filing for bankruptcy, your retirement account is, for the most part, not something you need to worry about losing. Further, if you are considering drawing upon your otherwise-exempt retirement account to pay off debt that is dischargeable in bankruptcy, you should consult a bankruptcy attorney before taking such an action. You may be sacrificing a secure future for a short-term delaying of the inevitable.
If you live in Michigan and are considering filing for bankruptcy, please contact me at john@hillalaw.com or (248) 246-2187 to schedule a free, initial consultation.
Categories: Bankruptcy Planning · Chapter 13 · Chapter 7 · Exemptions · Personal Property in Bankruptcy · Retirement Accounts
Tagged: 401(k), Bankruptcy Planning, Chapter 13, Chapter 7, detroit, IRA, Michigan, property, retirement account, southfield
In the Detroit, Michigan area, 341 Meetings and other Chapter 7 or Chapter 13 bankruptcy-related hearings are held in the Federal Bankruptcy Court at 211 West Fort St., Detroit, MI 48226. This court location houses all proceedings for debtors residing in Lenawee, Macomb, Oakland, St. Clair, Sanilac, and Wayne counties. Debtors residing in Jackson, Washtenaw, and Monroe counties may have proceedings—especially 341 Meetings—scheduled in downtown Ann Arbor instead.
Inside the Building:
In Detroit, 341 Meetings are held on the 3rd floor of the 211 W. Fort St. building. Passing through security is not required to access this area of the building. The main elevator bank of the building is accessed just before the security gateway through the building’s lobby. Once exiting the elevators on the third floor, simply look to your right or left to see the doubled-door entry to the always extremely crowded waiting area for 341 Meetings. Through that waiting area are the individual hearing rooms for each trustee. Your hearing will be held in one or another of these rooms, depending on who your trustee is.
Bankruptcy courtrooms are located on upper floors of the same building.
Parking:
The easiest place to park is the parking structure directly across Washington from the Bankruptcy Court. However, this ramp can run you as much as $15 per visit, last time I spent any appreciable time parked inside of it. If you are able to walk a few blocks, a better bet is the surface lots 2-3 blocks to the east up Fort St. These lots charge $6-$10 per visit, flat rate. Of course, everyone in Detroit knows of a free parking-spot somewhere in the downtown area, so you may have better luck elsewhere.
Driving Directions:
Depending on your point of origin, the best way to reach the Bankruptcy Court in Detroit is take the Lodge (M-10) south and take Exit 1B onto Congress. After that, it’s a quick left turn onto Washington and 1 block up to Fort. Otherwise, turning right onto Fort from Woodward Ave. will have you arriving in front of the Bankruptcy Court within a few, quick blocks.
If you are a resident of Michigan and have questions about whether bankruptcy is an appropriate choice for you, please contact me at john@hillalaw.com or (248) 246-2187.
Categories: 341 Hearing · Bankruptcy Basics · Bankruptcy court location · Michigan
Tagged: ann arbor, Chapter 13, Chapter 7, court location, detroit, Michigan, southfield
There is a quick and a not-so-quick answer to this question, depending upon whether you are filing Chapter 7 or Chapter 13 bankruptcy. The quick answer pertains to Chapter 13 bankrupties: if you are filing a Chapter 13 bankruptcy, the answer is YES, you will be able to keep you jewelry, no matter how valuable it is or much of it you have. The reason for this is that Chapter 13 bankruptcies are funded not through the liquidation of assets as Chapter 7 bankruptcies are but through the filing debtor’s income. Chapter 13 bankruptcies are payment-plans, essentially, and, throughout the 3-5 year life of the plan, the petitioning debtor makes a monthly payment according to the terms of the plan. It is that monthly payment that distributes “asset” to the debtors’ creditors, and the debtor’s property has nothing to do with it.
The not-so-quick answer pertains to Chapter 7 bankruptcies. A Chapter 7 bankruptcy is a complete liquidation of debt, not a reorganization as is a Chapter 13. Since all of a debtor’s debts are essentially erased through the Chapter 7 process, the creditors whose debts will be discharged by the bankruptcy are entitled to the proceeds of any of the debtor’s personal property that the court-appointed Trustee overseeing the Chapter 7 for the Bankruptcy Court is entitled to liquidate. That is to say, the extent to which creditors may have their debts satisfied is funded directly by the debtor’s personal property in a Chapter 7 and not by a monthly payment made from the debtor’s earned income as in a Chapter 13.
That being the case, the question for ANY property belonging to a debtor (jewelry or otherwise) is: “What property is the Trustee entitled to liquidate for those creditors?”
The Trustee may liquidate property that is, in short, not exempt from the “Bankruptcy Estate” that is created when the debtor files the bankruptcy petition. The Bankruptcy Estate is a legal estate much like a probate estate that is administered by a state court when someone passes away without a proper will having been written. In a probate matter, the state court determines the disposition of the deceased’s property. In a bankruptcy, the federal bankruptcy court, in the person of the trustee, determines the disposition on behalf of the creditors. Everything in the Bankruptcy Estate is able to be liquidated by the Trustee, and all of the debtor’s personal property and other assets are automatically part of the Estate—unless they are specifically, item by item, exempted from the Estate through the use of various exemptions that are provided in the Bankruptcy Code.
One of the more specific exemptions available in the Code is the exemption for a person’s jewelry.
The Federal exemption for jewelry is currently $1350.00. Jewelry that is higher in value than that amount may, in some cases, be covered by the “wildcard” exemption that is available to some debtors not utilizing their full homestead exemption. Otherwise, it may not be fully exempt and may be subject to liquidation by the Trustee.
The exemption for jewelry in Michigan, where I practice, is lower still: the Michigan exemptions (which be used instead of the Federal exemptions) provide for an exemption of just $3000.00 for ALL household goods, utensils, books, appliances, and jewelry—with the further provision that no one item be worth more than $450.00.
Therefore, the answer to the question of whether or not you may keep your jewelry in bankruptcy is, in a Chapter 7 bankruptcy, maybe. It depends upon the value of your jewelry and the availability of the “wildcard” exemption after the home you live in and all of your other personal property is taken into account and also whether or not you are using the Federal or state exemptions for your area. Further, when it comes to engagement rings and jewelry of particular sentimental value, the Trustees in your region may be lenient about liquidating the property even if not exempt, but this varies wildly by region and is best not to be counted upon.
If you have questions about the possibility of retaining your personal property through a Chapter 7 or a Chapter 13 bankruptcy, please contact me at (248) 246-2187 or john@hillalaw.com to schedule a free, initial consultation.
Categories: Chapter 13 · Chapter 7 · Debt Listing · Joint Property · Marriage and Bankruptcy · Personal Property in Bankruptcy
Tagged: Chapter 13, Chapter 7, detroit, engagement ring, exemptions, jewelry, Michigan, payment plan, property, trustee
First of all, Happy New Year! 2009 was a challenge for many of us, and, while economic forecasts for the coming year are swinging wildly depending on who is doing the forecasting, I wish all of my former, present, and future clients here in Detroit, Michigan the best 2010 possible.
The question I want to address here, in my first post of the year, is an extremely basic question but one which has been popping up a lot recently. Perhaps because of the economic climate, many of the potential clients I’ve spoken to have asked me about the possibility of leaving one debt or another off of the petition, such as a personal loan from a family-member or friend, or even a debt to a trusted doctor whose services they wish to continue using during and after the bankruptcy.
Unfortunately, the answer to the question is rather quick and easy from my point-of-view: no, you cannot knowingly exclude a debt from your bankruptcy petition. All known debts with a greater-than-zero balance must be listed and, in a Chapter 7, therefore discharged. Failure to list all of your debts may result in your petition being dismissed entirely or in criminal fraud charges.
If you accidentally leave a debt off of the petition, it is a simple matter to amend the petition to include it prior to receiving your discharge. The court charges a small amount for amendments which add a creditor to your petition, however, the cost of which your attorney may pass back to you. If the debt is not listed but your discharge is granted with no assets to distribute to creditors (i.e., yours was a “no-asset” case), the debt is discharged regardless of not having been listed.
Needless to say, the best policy is to forget nothing and omit nothing and to never have to make such an amendment in the first place. Working patiently with your bankruptcy attorney, who cannot know anything about your financial state of affairs that you don’t tell him or her, is a must. Remember, although it can be aggravating to comb through your personal papers for what is needed to compile a bankruptcy petition completely and accurately, your attorney is there to help you, and it will all be worth it in the end when each of those debts is finally discharged.
If you are a Detroit-area resident of Michigan and would like to schedule a free, initial consultation, please contact me at (248) 246-2187 or john@hillalaw.com .
Categories: Bankruptcy Planning · Bankruptcy Process · Chapter 13 · Chapter 7 · Debt Listing · Medical Bills · Student Loans · What Do I Need to File?
Tagged: Bankruptcy, Chapter 13, Chapter 7, debt, detroit, Michigan, southfield
December 4, 2009 · 1 Comment
It is perfectly feasible for a married individual to file Chapter 7 or Chapter 13 bankruptcy without his or her spouse doing the same thing. There are many reasons why one married partner might prefer not to file although the other partner is, such as the desire to maintain one individual’s credit rating or a lack of jointly titled personal or real property between the married couple that would be affected by a bankruptcy filing.
Regardless of the situation, however, certain information must be provided by both partners, even if only one of them is actually filing. The requirements for this will vary from area to area, but, in the Eastern District of Michigan, where I practice, the income and employment information for a non-filing spouse is required in a couple of different ways.
First, unless the married partners are legally separated and are maintaining completely separated households, both individuals’ actual, earned gross income is required for each of the 6 months prior to the month in which the bankruptcy petition is being filed for purposes of the Means Test. This will not vary by geographic area as it is required by the Federal Bankrtupcy Code. The Means Test is a mathematical formula that computes an average household monthly income for that 6-month period and determines whether the filer is above or below the median income for their state. If they are above the median, there is a presumption of fraud that must be rebutted for the petition to avoid being dismissed. If they are below the median, the petition should succeed. What may vary is the documentation required to prove this income received: in the Eastern District of Michigan, both partners must provide 6 months’ worth of actual pay-advices (pay-stubs) or other documentary proof of income.
Next, what may further vary from area to area is the extent to which the non-spouse’s income is required for the computation of the average household income and expenditures captured on Schedules I and J of the Bankruptcy Petition. Schedule I lists the gross income, withholdings, and, finally, net income for each wage-earning partner in an average month. Schedule J lists the entire household’s average monthly expenditures in various specific areas, such as rent or mortgage payment. The court-appointed trustees who oversee each bankruptcy petition in the Eastern District of Michigan with an eye toward liquidating unexempt assets for the benefit of creditors whose debts will be discharged by the bankruptcy want to see both income streams reflected separately in Schedule I and the household expenses listed in aggregate on Schedule J.
Many of my propsective clients who are married but wishing to file alone, without their spouses, ask me why they must provide this information. Frequently, they are not necessarily on the best of terms with their spouses and are sometimes working to establish a financial jumping-off point for a full separation or divorce from their spouse. It is not always comfortable for them to approach the spouse to obtain this information. Nevertheless, it is required, and those who are in such a position should be aware of this requirement in advance.
If you are a resident of Michigan and are interested in filing for bankruptcy and have questions about this or any other topic, please contact me at john@hillalaw.com or (248) 246-2187 to schedule a free, initial consultation.
Categories: Bankruptcy · Chapter 13 · Chapter 7 · Income · Joint-Filing · Means Test
Tagged: Chapter 13, Chapter 7, detroit, eligibility, income, means test, Michigan, non-filing spouse, southfield, spouse
This seems an obvious question, but, as an article in today’s New York Times discusses, medical bills are a primary reason that many Americans file for bankruptcy. It is certainly the case among most, if not all, of my clients in the Detroit, Michigan area, that medical bills comprise a huge portion of the debt that I see. Amongst those that I meet who are roughly age 35 or under, nearly all are seeking bankruptcy as a solution entirely due to huge medical bills. Younger people in this country, as a statistical group, are significantly underinsured or uninsured entirely, and one bad medical emergency can cripple them financially for years to come, even, at times, dwarfing the outrageous obligations that today’s student loan burdens are imposing on new graduates.
Whether these medical bills can be discharged through bankruptcy is, therefore, a question worth answering outright—because so many of my clients do ask it. The answer is slightly different depending upon whether you’re talking about a Chapter 7 or a Chapter 13 bankruptcy, but, in both cases, the answer should give those struggling with impossible medical debt some basis for optimism.
In a Chapter 7 bankruptcy, the answer is an unqualified “YES!” In a Chapter 7, medical bills are treated the same as credit-card and other forms of unsecured debt: they are completely discharged. The only complication arises from debtors themselves, many of whom do have a positive and long-term relationship with their doctors and a strong desire to maintain that relationship. While many Americans have not had consistently high-quality or considerate medical care, others do want to keep using a doctor or other medical professional that they have come to know and trust over many years. They don’t want to “stiff” these doctors.
This is a very common feeling … It is admirable and understandable. But anyone shouldering an amount of medical debt that is so high that it is causing them to consider bankruptcy in the first place is between a rock and a hard place: the doctor did not, in turn, feel sentimental enough about the relationship to charge less in the first place, after all. They may be willing to work with longtime patients in offering payment plans and other options, but, in my experience, most will otherwise have no reservation about referring debtors to aggressive collection agencies to collect the amount owed. Medical collection agencies are among the most obnoxious that I have encountered in my practice, and, in my opinion, no one should feel badly about using the legal option of bankruptcy to protect themselves and their families.
In a Chapter 13 bankruptcy, the answer is slightly more complicated. Chapter 13 is a reorganization process through which debtors and their attorneys pay off debt through a 3-5 year payment plan. Debts are paid according to a certain priority established by the Federal Bankruptcy Code. As in a Chapter 7 bankruptcy, medical bills are classifed as unsecured debt, and unsecured debt is paid lastly in a Chapter 13 plan, after “secured” debt like home mortgages and “priority” debt like federal and state taxes and child-support. There are many requirements for the approval of these payment plans, but, generally, at the end of the 3-5 year period, providing that enough of the unsecured debt has been paid by the plan, the remaining unsecured debt is discharged as in a Chapter 7 liquidation. Therefore, the discharge of medical debt in a Chapter 13 is not as broadly sweeping as in a Chapter 7. Depending on how much credit-card and other unsecured debt a person has, some percentage of the medical debt will have to paid off through the Chapter 13 plan.
Medical debt is out of control in this country. Anyone receiving a bill from their local hospital for something as simple as an MRI test is well aware of this. More complicated procedures can derail a person’s financial planning for years to come. However, bankruptcy, whichever form is most appropriate for each individual, does provide a solution. It is not a solution that always feels right, as doctors are people with whom we all would like to develop a positive relationship. But, after the service has been rendered and the bills mailed, no one should feel badly about choosing to not live as a slave to a type of debt that no one else in our governmental system is working very hard to lower for you, regardless of what the headlines are saying about the insurance “reform” bill working its way through the Senate as I write.
If you have questions about medical bills and bankruptcy, please contact me at (248) 246-2187 or visit my website to schedule a free, initial consultation. Services provided to Michigan residents only.
Categories: Chapter 13 · Chapter 7 · Medical Bills · Michigan
Tagged: Chapter 13, Chapter 7, debt, detroit, hospital bills, Medical Bills, Michigan, southfield
Several times in recent weeks, individuals I’ve counseled wishing to declare bankruptcy have revealed to me that, in addition to their personal bank accounts, they are also listed as “joint holders” on someone else’s bank accounts, such as an elderly relative, sibling, or friend. (For the sake of clarity, I am not discussing joint bank accounts between married individuals in this post.) Particularly in the case of elderly parents, this is often for convenience or estate-planning purposes, as the parent anticipates the possibility that, at some point, they may be physically unable to gain access to their needed funds. In such cases, the jointly named potential bankruptcy filer may have contributed little or no funds to the account at all; they are simply listed as a user in case their parent needs assistance with finance-related daily activities. They own 0% of the funds in the accounts, yet they are listed as an “owner” of the account for all general purposes. This raises a serious question when they need financial assistance themselves, in the form of bankruptcy: will those funds be protected from the court-appointed bankruptcy trustee, whose job it is to liquidate all available assets for the benefit of the creditors whose debts are to be discharged in the bankruptcy?
In Michigan, where I practice, this question is framed with a point of state law: MCL 487.703 holds that there is a presumption of joint ownership of any funds in a bank account with joint users listed in this way. Although the bankruptcy process itself is governed by Federal law, certain underlying considerations in the process are dependent upon the laws of the state in which the bankruptcy is being filed. This is such a consideration.
What that means, then, is that, in Michigan, if you are listed on someone’s bank account and that account has, for example, $10,000 of that person’s money in it, Michigan state law (and the Eastern and Western Federal District Courts along with it) will presume that $5,000 of that money belongs to you.
The potential effects of that presumption are serious and should certainly be taken into consideration when deciding to file bankruptcy. However, the presumption of joint ownership that I’ve described is rebuttable, which means that, if an individual has evidence that proves that they don’t own the funds in the account, the bankruptcy court should leave the funds unaffected.
Depending on the amount of money involved (bankruptcy trustees earn a percentage of the funds liquidated for creditors’ benefit), this may be easier to accomplish or more difficult to accomplish. Depending on the specifics of each individual situation, there are different ways of listing the joint accounts in the bankruptcy petition to foreclose the possibility that the trustee will become interested in liquidating an account that does not actually belong to the filing debtor. It may even be preferable to have the accounts closed prior to the filing of the bankruptcy, though this is a delicate operation and should certainly not be considered if any percentage of the funds do indeed belong to the filing debtor.
One thing is clear, in any case: all such accounts should be disclosed to your bankruptcy attorney who will, in turn, make the correct decision as to how best to disclose and list them in the bankruptcy petition. Such situations are delicate but are also easily managed by a knowledgeable attorney. Complications such as this often trip up individuals opting to file for bankruptcy without the use of an attorney and are a strong example of how something that seems simple and obvious can have serious ramifications when attempted without qualified legal advice.
If you are listed on another’s bank accounts and are considering filing for bankruptcy, please contact me at john@hillalaw.com or (248) 246-2187 to schedule an initial interview so that we may best decide, together, how to protect your assets through the bankruptcy process.
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I’d like to thank the many generous NACBA attorneys who have recently contributed to my knowledge on this subject.
Categories: Chapter 13 · Chapter 7 · Joint Property · Michigan
Tagged: Bankruptcy Planning, Chapter 13, Chapter 7, co-signers, detroit, joint bank accounts, Michigan, property
November 9, 2009 · 1 Comment
As a bankruptcy attorney, I’m constantly surprised by the number of clients or potential clients I speak to who believe that, to file Chapter 7 or Chapter 13, they need to move, hide, or sell off assets in order to succeed in their filing. Worse, people often admit that they have been counseled by friends or relatives to hide assets from me, their retained attorney. Fortunately, none of my clients have actually done anything like that, but the fact that so many believe that they should at least consider failing to disclose or hiding their assets suggests that there is a great deal of misinformation about the bankruptcy process at large in the metro Detroit, Michigan area, where I practice.
One of the best rules of thumb in bankruptcy filing is applicable to virtually every area of life: honesty is the best policy. It is always best to disclose all of your assets, right down to your pet gerbil and your baby’s miniature sneakers. Why? First of all, hiding assets is fraudulent and could result not only in the dismissal of the petition that you have paid your lawyer to create and file for you but also could result in criminal charges. If you’re filing for bankruptcy in the first place, chances are good that hiding your mini-bike in a friend’s garage or transferring its title to your cousin’s sister is not going to make conditions appreciably better for you in the wide scheme of things.
Secondly, as your attorney, I am your representative. I am there to make sure that your petition succeeds and that you receive a successful discharge in the end. Attorney-client confidentiality is the bedrock of our relationship, and you can bet that, if you tell me honestly what assets and liabilities you are shouldering, I will tell you honestly how best to deal with it. If that potentially includes advice to wait in your filing or to not file bankruptcy at all, it is best that you know that in advance, straight up, from someone you can trust—if for no other reason than you have paid me to work for you.
However, the bottom-line answer that I give to my clients who ask about such tactics is, “Why would you bother?” It is true that some potential bankruptcy petitioners do have significant assets to deal with. In this economy, many bankruptcy filings are indeed arising from members of the middle and even upper-class who would not have been put into that position in years past. Such filers may indeed have multiple real properties, multiple vehicles, even boats or yachts or significant corporate holdings or cash reserves. Otherwise, though, most Chapter 7 filings do not involve a critical mass of luxury items. Rather, those petitions generally involve the sorts of things that working people tend to have: a home, a car or two, and personal possessions.
If you are one of the minority of potential bankruptcy filers who do have significant holdings of what might be classified as luxury goods, you should indeed face up to the reality that, if you file bankruptcy, you will most likely lose some property, especially in a Chapter 7 bankruptcy. If you are amongst the majority of potential filers, however, who have gathered the sorts of everyday possessions that most people gather as they go about living their lives, there is no need to worry that you will lose anything: the statutory bankruptcy exemptions provided for by the Bankruptcy Code are quite adequate to protect your personal possessions from liquidation 99% of the time.
Never panic. Always disclose, especially to your attorney. Honesty really is the best policy.
If you have any questions about whether bankruptcy is an appropriate choice for you, contact me at (248) 246-2187 to schedule an initial consultation.
Categories: Bankruptcy Planning · Bankruptcy Process · Chapter 13 · Chapter 7 · Michigan
Tagged: Bankruptcy Planning, Chapter 13, Chapter 7, detroit, exemptions, fraud, Michigan, property
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
