Category Archives: Debt Listing

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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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.

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

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Can I Keep My Jewelry if I File for Bankruptcy?

Posted on January 16, 2010 | Leave a comment

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 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 Chapter 13, Chapter 7, Debt Listing, Joint Property, Marriage and Bankruptcy, Personal Property in Bankruptcy

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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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