Category Archives: Bankruptcy Process

Can I Discharge in Bankruptcy a Settlement of a Lawsuit that Alleged Fraud?

Posted on April 14, 2011 | Leave a comment

The Bankruptcy Code states that a debt is not dischargeable in Chapter 7 or Chapter 13 bankruptcy if it is owed for money obtained through fraud. The US Supreme court has upheld even the non-dischargeability of a settlement of a lawsuit in which a complaint of fraud is alleged as owed “for money obtained through fraud.” In short, although you must list all debts owed in your bankruptcy petition when you file it, some of those debts may not actually be discharged by the bankrutpcy, and “fraudence-based” debts are one of those types.

However, the question remains: what is a debt obtained through fraud?

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Posted in Bankruptcy Laws, Bankruptcy Process, Business Debt, Debt Listing, Judicial Decisions, Michigan, Uncategorized

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Is My Chapter 7 Bankruptcy Case Really Over (Part II)?

Posted on April 5, 2011 | 1 Comment

Generally, when a Chapter 7 bankruptcy has been closed by the Bankruptcy Court, it is because the Chapter 7 Trustee has either expressly issued an “Order of Abandonment” abandoning all interest in the debtor’s personal property and real estate or has constructively done so via the entry of a “Report of No Distribution” stating that there are no assets in the estate to distribute, allowing the court clerk  to close the case. Once this has occurred, typically, the bankrutpcy is finally over and, if the homeowner wishes to short sell or otherwise dispose of his or her home, he or she is free to do so.

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Posted in Bankruptcy Process, Chapter 7, Home Mortgages and Bankruptcy, Michigan, Mortgage Modifications, Real Estate, Short Sales

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When Is My Chapter 7 Bankruptcy Actually Over?

Posted on March 4, 2011 | 8 Comments

Your discharge shows up in the mail, and you breathe a sigh of relief: it’s over! Your Chapter 7 bankruptcy is a thing of the past, and you can go back to living your life and breathing that fresh Detroit air … You thank your attorney for a job well done, and you begin imagining a future permanently free of collection phone-calls, of bills pouring out of your mailbox every afternoon, of worrying about whether a creditor or even that inscrutable figure, the Chapter 7 Trustee, is going to do something unexpected to muck up your plans to just get it all over with and to just get on with your life.

Most of the time, this is the right way to feel when you receive your discharge. However, some of the time, it’s still too soon to celebrate. Continue reading →

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Posted in Bankruptcy Process, Chapter 7, Home Mortgages and Bankruptcy, Mortgage Modifications, Personal Property in Bankruptcy, Short Sales

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What Is a Chapter 13 Bankruptcy Plan?

Posted on December 21, 2010 | 8 Comments

What is the Chapter 13 Plan itself? Very simply, it is list of debts to be paid in a certain order, according to a certain timeline, and, in the case of the unsecured creditors at the bottom of the priority order, to a certain percentage of what was originally owed to them—anywhere from 0% to 100%.

The priority order of debts to be paid is fixed by the Bankruptcy Code:

  1. “Administrative” Costs: These are the Trustee’s percentage earned of the total paid into the plan by the debtor (currently around 8% in the Eastern District of Michigan), as well as the balance of Attorney’s fees not paid prior to filing. Unlike in a Chapter 7 bankruptcy, the majority of Attorney’s fees are paid through the Plan rather than up-front, and these fees are highly scrutinized by the Bankruptcy Court.
  2. “Secured” Debts, such as home loans and car loans, come next.
  3. Continue reading →

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Posted in Bankruptcy Laws, Bankruptcy Process, Chapter 13, Debt Listing, Home Mortgages and Bankruptcy, Michigan

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What Is the Chapter 13 Bankruptcy Process in Michigan?

Posted on December 16, 2010 | 4 Comments

The Chapter 13 process and time-line is greatly variable as compared to the Chapter 7. Like a Chapter 7, the process begins by providing a large amount of documentation to the filing debtor’s attorney and the taking of the first of two credit counseling courses.

With that documentation, the debtor’s attorney drafts, in a Chapter 13, not just a petition but also the Chapter 13 Plan.

 The Chapter 13 Plan be a 36-month Plan up to a 60-month Plan. Although there is no Means Test-based eligibility standard in a Chapter 13, the Means Test still plays a role: if the filing debtor “passes” the Means Test, that individual is allowed to propose a 36-month plan. If that filing debtor “fails” the Means Test—that is, has income higher for his or her household size than the state median—that individual must propose a 60-month Plan.

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Posted in Bankruptcy Process, Chapter 13

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Do I Have to Take A Credit Counseling Course I Have To Take Before Filing Bankruptcy?

Posted on June 3, 2010 | Leave a comment

One of the “innovations” of the 2005 BAPCPA “bankruptcy reform” that Congress enacted was a requirement to take not one but two “credit counseling” courses along with the filing of a bankruptcy petition. The first of these courses is a pre-filing credit-counseling course, and the second is a post-filing “debtor education” course. Both courses may be taken in person, online, or by phone, and they allegedly provide the service of informing the prospective bankruptcy filer of some of the basics of financial and debt management that they might not have been aware of prior to reaching that stage. The two classes have been a mandatory requirement of the bankruptcy process since 2005. The certificate of completion of the first, pre-filing course must be attached to the bankruptcy petition when it is filed.

What these classes actually do is simple, however: they cost you a little more money, and they comprise one more hoop to jump through on your way to achieving a legal discharge of your debts through bankruptcy. They will waste a little of your time and, most likely, provide little to no information to you that is actually in any way useful. What I tell my clients in the Detroit, Michigan area when they ask me what they will hear in the bankruptcy course is that they will hear the sorts of things that Congressmen and Senators of a certain political inclination to believe that anyone who files bankruptcy is somehow immoral or cheating the system thinks that people of that sort ought to hear. In other words, obviousness peppered with a little condescension.

The classes usually only take 20-30 minutes of your time (although I have had a couple of clients report that the post-filing debtor education course took them up to 1.5 hours), and the high end of the costs for the classes is around $50 each. It is not a terrible burden. There are a number of companies that provide these courses, and some of them are better than others in that they quickly provide the certificate of completion to the participants’ attorneys and in that they are more or less likely to provide pseudo-legal advice to participants that is more rightfully delivered by actual attorneys. Many attorneys recommend one provider over another, as I do myself, but, always, you are free to choose your own provider, so long as the certificates of completion are delivered to your attorney in a timely manner.

None of my clients have reported actually enjoying these courses, and I don’t blame them. I do hear a healthy amount of complaining about the requirement, especially from those who have filed for bankruptcy before, prior to 2005—but a requirement it is. It is best to understand beforehand that this is one of the requirements of current bankruptcy law and to just get it over with with a reasonable amount of good humor and courtesy to the company providing the course.

If you are a southeast Michigan resident and are considering filing for bankruptcy, please contact me at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.

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Posted in Bankruptcy Basics, Bankruptcy Laws, Bankruptcy Process, Chapter 13, Chapter 7, Credit Counseling Course, What Do I Need to File?

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Will Filing Bankruptcy Hurt My Immigration Status?

Posted on April 26, 2010 | 2 Comments

As a bankruptcy attorney in the Detroit, Michigan area, which is home to an extremely diverse immigrant community, this is a question I am asked often.  The good news is that there is no hard and fast rule existing in US immigration law or in the N-400 Application for Naturalization. Although I concentrate my practice on bankruptcy and criminal work and not at all on immigration law, Miami immigration attorney Michael Shane addresses the immigration law end of this question very nicely in his article posted here.

In short, Shane says that no question is asked on the N-400 as to applicant’s bankruptcy filing status, nor is there any law or statute requiring that this inquiry be made throughout the naturalization process. There is a question on the N-400 asking whether an applicant has failed to file an income tax return or owes any unpaid taxes, however, and it is possible that a “Yes” answer to this question will result in the need for an explanation as to why. A bankruptcy may end up the topic of the conversation in this manner. As Shane correctly points out, however, the mere fact that an applicant has filed bankruptcy does not mean that unpaid taxes or a failed return filing is implicated: there are many reasons why people file for bankruptcy, and unpaid taxes are by far not the most common cause.

Shane does mention the possibility, however, that a bankruptcy filing in a naturalization applicant’s history could conceivably be considered “poor moral character” if filed within the 5 years immediately preceding the N-400 application if the bankruptcy petition evidences behavior such as a failure to make child support payments and other individual acts that are, by statute, considered to be evidence of poor moral character.

If you are a southeast Michigan resident and are considering filing for bankruptcy, please contact me at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.

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Posted in Bankruptcy Planning, Bankruptcy Process, Chapter 13, Chapter 7, Child-Support, Immigration Status and Bankruptcy, Michigan

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What Is the Automatic Stay and How Does it Protect Debtors in Chapter 7 and 13 Bankruptcy?

Posted on April 13, 2010 | 2 Comments

In several previous entries, I’ve touched upon this thing called the Automatic Stay in the Chapter 7 and Chapter 13 bankruptcy process, but I haven’t fully described what it is and what it means to Detroit, Michigan-area residents considering filing for bankruptcy.

The Automatic Stay is one of the primary and most immediate benefits of filing for bankruptcy. In short, it is a stay against nearly all collection attempts by creditors upon individuals who filed a Chapter 7 or Chapter 13 bankruptcy petition, and it is enforced automatically upon the filing of those petitions. In other words, the moment that a personal bankruptcy petition is filed, it becomes a violation of Federal law under the § 362 of the US Bankruptcy Code for creditors of that filing individual to do anything that would qualify as an attempt to collect their debt, including phone-calls, letters, foreclosures, reposssessions of property, set-offs of funds, perfection of liens, garnishments, civil collection lawsuits, etc. Some creditors are not barred by the Automatic Stay, such as those collecting for past-due child-support and for criminal penalties, but, otherwise, every creditor that you owe money to is barred from trying to collect it while the Automatic Stay is in place.

The Automatic Stay lasts from the filing of the petition through the granting of the discharge, roughly a 3.5 to 4-month period. Thus, it is not a permanent stay against collection attempts, but it is generally sufficient to keep the creditors off of filing individuals’ backs while the bankruptcy petition is in process. For most unsecured debts, such as credit-cards and medical bills, it is effectively permanent as these sorts of debts in a Chapter 7, at least, are discharged at the end of the period virtually without fail.

While the Automatic Stay is in effect, any creditor who wishes to proceed to collect from you must first file a motion with the bankruptcy court to lift the Automatic Stay. This can happen in various circumstances, most often with regard to secured creditors who would like to repossess or foreclose upon the collateral securing their loan to you. Short of filing a motion of this sort and receiving a favorable outcome from the court, commercial creditors are unable to proceed against you during your bankruptcy process.

However, the Automatic Stay is not magic: creditors have to know that you have filed for bankruptcy in order to abide by it. Thus, it is crucial that you ensure that your bankruptcy attorney has each and every creditor that you owe any amount of money to listed completely and accurately in the petition. If a creditor is listed in the petition, that creditor will receive a notice from the bankruptcy court upon the filing of your petition that alerts them to the fact that the Automatic Stay is now in effect.

For that reason, it is vital that you work closely with your attorney and work hard to provide him or her with all of the information needed to fully complete your petition.

If you are a southeast Michigan resident and are considering filing for bankruptcy, please contact me at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.

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Posted in Bankruptcy Process, Chapter 13, Chapter 7, Debt Listing

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What Happens if I Forget to List a Creditor in My Bankruptcy Petition?

Posted on February 16, 2010 | Leave a comment

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 southeast Michigan resident and are considering filing for bankruptcy, please contact me at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.

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Posted in Bankruptcy, Bankruptcy Planning, Bankruptcy Process, Chapter 13, Chapter 7, Debt Listing, Michigan, What Do I Need to File?

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Do I Need to List All of My Debts in my Bankruptcy Petition?

Posted on January 11, 2010 | Leave a comment

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 southeast Michigan resident and are considering filing for bankruptcy, please contact me at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.

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Posted in Bankruptcy Planning, Bankruptcy Process, Chapter 13, Chapter 7, Debt Listing, Medical Bills, Student Loans, What Do I Need to File?

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