Category Archives: Bankruptcy Planning

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.

→ Leave a comment

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

Tagged , , , , , , , ,

Am I Responsible for My New Spouse’s Debts?

Posted on February 9, 2010 | 1 Comment

This question is a very common one, and it is, unfortunately, often the basis for uncomfortable discussions between those wishing to marry.

Much of the confusion regarding the answer is, I think, a result of media reports of the divorces of the rich and famous, many of whom reside in California, a community property state. My state, Michigan, is not a community property state … For the purposes of divorce, it is what is known as an “equitable distribution state.” That is, couples who divorce are entitled to a distribution of the property that they accumulated through their marriage according to the contribution they made to that property. It is not an even 50% split by any means, though that can, in some circumstances, be the result. All of that discussion, however, concerns the question of property—not debt.

When it comes to bankruptcy and to concerns about “marrying into debt,” the equation is more cut-and-dry: the answer to the question of whether your are responsible for your new spouse’s debt-load is NO.  You are not automatically made party to the contracts of sale and credit your new spouse has agreed to be party to by virtue of your marriage. There is no mechanism in the law that automatically adds your name to any contract to which you have not agreed to be personally liable.  While the civil act of marriage does, depending on the state that you live in, potentially entitle you to some portion of your new spouse’s property either in the case of divorce or death, a marriage does not have any legal effect with regard to each participating spouse’s personal debt accrued prior to the marriage.

It is always a good idea, of course, to discuss your financial liabilities with a prospective spouse prior to marriage so that, as a couple, you can adequately plan for the lifestyle you wish to achieve together. Further, one may consider it a matter of personal ethics or morality to “warn” a prospective spouse if your debt-load is high. However, regardless of the outcome of that necessary discussion, unless you co-sign for loans or credit-cards after the marriage is completed, you will NOT “marry” each other’s debt.

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.

→ 1 Comment

Posted in Bankruptcy Planning, Business Debt, Debt Listing, Marriage and Bankruptcy

Tagged , , , , , , , ,

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.

→ Leave a comment

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

Tagged , , , , , ,

What Assets Should I Disclose to My Bankruptcy Attorney?

Posted on 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 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.

→ 1 Comment

Posted in Bankruptcy Planning, Bankruptcy Process, Chapter 13, Chapter 7, Michigan

Tagged , , , , , , ,

Can I Keep My House if I File for Chapter 7 Bankruptcy?

Posted on August 5, 2009 | 5 Comments

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 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.

→ 5 Comments

Posted in Bankruptcy, Bankruptcy Planning, Chapter 7, Home Mortgages and Bankruptcy, Michigan, Reaffirmation Agreements

Tagged , , , , , , , ,

Can I Repay a Personal Loan to a Friend or Family Member before Filing for Chapter 7 Bankruptcy?

Posted on July 27, 2009 | 1 Comment

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.

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.

→ 1 Comment

Posted in Bankruptcy, Bankruptcy Basics, Bankruptcy Planning, Bankruptcy Process, Chapter 7

Tagged , , , , , , ,

How Long Will It Take to Rebuild my Credit after Bankruptcy?

Posted on July 23, 2009 | 1 Comment

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 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.

→ 1 Comment

Posted in Bankruptcy & My Credit-Score, Bankruptcy Basics, Bankruptcy Planning, Bankruptcy Process, Chapter 13, Chapter 7

Tagged , , , , , , , , , ,

Michigan Bankruptcy Lawyer: Best of the Bankruptcy Basics

Posted on July 3, 2009 | Leave a comment

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.

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.

→ Leave a comment

Posted in Bankruptcy, Bankruptcy Basics, Bankruptcy Planning, Bankruptcy Process, Chapter 13, Chapter 7, Michigan, Uncategorized

Tagged , , , , , , ,

How Long Does the Bankruptcy Process Take? What IS the Bankruptcy Process?

Posted on June 1, 2009 | 8 Comments

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 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.

→ 8 Comments

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

Tagged , , , , , ,