Tag Archives: hilla

What Happens to my Reverse Mortgage if I File Bankruptcy?

Posted on May 25, 2009 | 2 Comments

Real estate subject to a “reverse-mortgage” is valued the same way that real estate subject to other sorts of mortgages are for purposes of bankruptcy. Both an “ordinary” mortgage and a reverse-mortgage are liens against the value of the property that will affect the determination of whether the owner of the property actually has any equity in it or not. In this manner, there is no difference between the two types of liens, and a determination that a debtor has no equity in his or her real estate governs the options available for retaining the property through bankruptcy.

The difference between the two lies not in valuation of the property but in the chief benefit that consumers look to reverse-mortgages to receive: a line of credit.  Typically, in the most common reverse-mortgage situation, a homeowner meeting certain criteria assigns a future interest in the full value of the real estate—their home, generally—in exchange for a line of credit which pays out a set amount per month for an allotted period of time, which, in many cases, particularly with regard to elderly consumers, may be the remainder of the consumer’s life. It is a means for a consumer living on limited income, often, to increase their monthly standard of living without losing the benefit of the roof over their heads—at least, when it works as advertised (I won’t comment further here about when this is or isn’t the case).

When that same consumer, however, runs into other trouble and needs to file for personal bankruptcy, the sticking-point for debtors with real estate subject to a lien that is a result of a “reverse-mortgage” is whether or not the finance company providing the reverse-mortgage will continue to provide the line of credit to the consumer under the terms of the original reverse-mortgage agreement. Whether or not this is the case is determined by a wide variety of factors, such as the amount of credit remaining in the line of credit, the business strategy of the finance company when confronted by such situations, as well as others.

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.

→ 2 Comments

Posted in Chapter 13, Chapter 7, Home Mortgages and Bankruptcy, Uncategorized

Tagged , , , , , , ,

Can I Still Use My Credit-Cards if I am Considering Bankruptcy?

Posted on March 23, 2009 | Leave a comment

It may seem obvious, but, for all practical purposes, the answer to this question is NO. Any credit-card usage within 90 days of the filing of a bankruptcy petition will be scrutinized for potential fraud by both the bankruptcy trustee and any involved creditors. If the use of a credit-card within that time-period is found to be fraudulent—that is, purchases made without any actual intent to pay for them—that debt will not be discharged, and the petition as a whole could face the possibility of complete dismissal. Additionally, the possibility of criminal fraud charges against the debtor also exists.

As with any allegation of fraud, the question of whether a particular debt that is otherwise dischargeable in bankruptcy may be found to be non-dischargeable through false pretenses generally swings on the factual circumstances surrounding the purchases in question. The creditor has the burden of proof in make an allegation of fraud, so it must prove that the debtor intentionally misrepresented his or her intention to pay when making the purchases. Credit-card debts that a debtor simply turned out to be unable to pay are not fraudulent, so creditors must be able to prove the intent to fraud in order to render a debt non-dischargeable.

Naturally, this is easier said than done, unless the debtor wishing to file bankruptcy has used a credit-card to go on an obvious spending-spree or used it to purchase items that the bankruptcy court would classify as “luxury goods or services.” Any debt of more than $500 to a single creditor for luxury goods or services less than 90 out from the filing of a bankruptcy petition will be presumed fraudulent, for instance. Likewise, cash advances on credit cards of a certain amount within only 70 days prior to a bankruptcy filing will also be presumed fraudulent. Questions of proof in these sorts of cases will generally involve arguing that items purchases did or did not fall into the “luxury goods or services” classification, and, further, the presumption of fraud may be rebutted with proof that the items purchased were needed because of a sudden change in the debtor’s circumstances or with other factual showings that the debtor honestly needed and meant to pay for the items purchased.

Courts generally will examine circumstantial evidence, however, that a debtor did not intend to make good on a debt incurred through the use of credit-cards, as well as whether the credit-card use was made after the credit-card limit has been exceeded or after the creditor has contacted the debtor instructing them to destroy or return the cards.

As with any allegation of fraud in any area of the law, individual circumstances will determine the outcome of an investigation. However, such as investigations are easily avoided by simply ceasing to use credit-cards or ceasing to make unnecessary purchases the moment you realize that you may need to file for bankruptcy. Continued use may not only expose you to allegations of fraud but may also delay the point at which you are able to file for bankruptcy, as the obvious advice a bankruptcy attorney would give to a prospective client with such activity on their accounts is to wait until at least the 90 days has elapsed, if not longer.

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, Chapter 13, Chapter 7

Tagged , , , , , , , ,

What Is The Means Test and How Does It Work in Chapter 7 Bankruptcy?

Posted on March 3, 2009 | 8 Comments

Many people contact me and ask whether I think they make too much money to file for a Chapter 7 bankruptcy. What they are really asking is whether the “means test” that they may or may not have heard about by name excludes them from the Constitutionally guaranteed bankruptcy process. Some of them have even spoken with a lawyer who has expressed an opinion on their question in terms of its answer being a yes-or-no or black-and-white fact. “No, if you make $X per year, you cannot declare bankruptcy,” or, “Yes, since you make less than $X per year, you may declare bankruptcy.”

Fortunately, it is not so simple as that. The so-called Means Test, which is the result of a provision inserted into the Bankruptcy Code in the 2005 BAPCPA amendment to the Code, is a somewhat disengenuous attempt by anti-consumer lawmakers to root out fraudulent bankruptcy petitions, despite that fact that no evidence was proffered to prove that there was any widespread national problem with consumer bankruptcy fraud. Regardless of the baselessness of its alleged purpose, what it is, at its core, is a mathematical formula, the result of which determines whether a given bankruptcy petition should be assigned a “presumption of abuse” or not by the bankruptcy court. Petitions that fall within this “presumption of abuse” range must prove that they are not, in fact, fraudulent. The same, new section of the Bankruptcy Code allows the bankruptcy court to dismiss a Chapter 7 case if it is not proven that the petition is not “abusive.”

The Means Test is applied to consumers whose debt is primarily consumer debt and not business or other debt.

Before the Means Test formula is applied, however, there are some “safe harbors” which save certain consumers from having to work through the test in the first place. The primary “safe harbor” is for debtors with incomes below the state’s median income. If your current monthly income X12 is equal to or less than your state’s median income, the Means Test need not be applied and motions to involuntarily dismiss the petition as abusive, as described above, may not be brought. In Michigan, where I practice, the median income is set to increase after March 15, 2009 to $44, 703 for a single earner (it increases incrementally for each additional person in the household), so, for example, a single person earning $40,000/year would not be subjected to the Means Test. There are various particulars involved in determining exactly what incoming assets are considered to be part of a person’s “income” for purposes of this test, but, if, in total, the figure is below the median-line, there is considered to be “no presumption of abuse.” Additionally, there is a separate safe harbor for disabled veterans if their debt was incurred primarily while they were on active duty or performing related activities.

Where the debtor’s income is over the median-line for their state for a household of their size and they are not a qualifying, disabled veteran, the next step in the process is to apply the Means Test to determine whether there is a “presumption of abuse.” A presumption of abuse occurs when the result of the Means Test formula is that, after various expenses specified by the Bankruptcy Code are deducted, a debtor’s income, when multiplied by 60, is the lesser of $10,000 or 25% of the debtor’s non-priority, unsecured debt—as long as that 25% is $6000 or more.

Get that?

What it means is that, once you deduct a bunch of expenses that the Bankruptcy Code allows you to deduct, you multiply your monthly income by 60, and, if the result is either under $10,000 straight off or over $6000 and also amounting to 25% or more of your “non-priority, unsecured debt,” the bankruptcy court will presume that your petition is fraudulent.

As I said, it’s not a simple process, and there is no easy determination of “eligible to file” or “not eligible to file.” Even if reading my explanation of the test itself makes pretty good sense to you—and I hope it does—the devil, as always, is in the details. For instance, some of the expenses you are allowed to deduct from your income off the top are education expenses, charitable contributions, secured debt expenses, health insurance, etc., etc., etc. Figuring out exactly what that final monthly income amount is prior to even administering the test itself is no mean feat. In addition, the question of whether debt is “priority” or “non-priority,” “secured” or “unsecured” is also something that cannot be answered at first glance. For an experienced bankruptcy attorney, these are, however, familiar terms and concepts, and he or she can quickly and properly ascertain these things—just not usually over the phone in a brief conversation.

If the Means Test, after all of this, determines that there is a “presumption of abuse” in the debtor’s petition, that presumption can be rebutted by certain “special circumstances.” What this amounts to, basically, is an argument that there are reasonable reasons why your income falls where it does and that those reasons are not abusive or fraudulent. Each bankruptcy court has wide latitude to agree or disagree with this argument, and it takes a skilled attorney to carry it across.

In short, if you have spoken with an attorney who has, rather too quickly assured you that you are ineligible to file for bankruptcy, seek a second opinion. On the other hand, if you are hoping to simply call an attorney and, in a two-minute conversation, find out whether you are eligible to file a Chapter 7, think again. Determining a Means Test outcome requires a lot of work for both a debtor and his or her attorney, and it is truly a process requiring mutual effort.

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, Chapter 7, Michigan

Tagged , , , , , , , , , ,

Can My Student Loans Be Discharged in Bankruptcy?

Posted on February 26, 2009 | 3 Comments

collingebook2This is an issue near and dear to my heart, as, having gone to law school somewhat later in life after a lengthy career as a graphic designer, I myself will most likely die of old age long before my own student-loans are paid off. Some of the problems and causes of students’ wildly increasing student loan bills were discussed yesterday on NPR’s On Point show with author Alan Michael Collinge, whose new book, The Student Loan Scam, discusses the unholy relationship between student loan lenders, university financial aid administrators, and the US Congress in a most enlightening and, sadly, disheartening, manner. In his radio interview, Collinge explicitly addressed one of the most egregious problems with student loans as a rising component of Americans’ escalating debt-loads: namely, that, for all intents and purposes, they are not dischargeable in bankruptcy, either in Chapter 7 or Chapter 13.

If you’re interested in hearing more about why this is so and how this situation came about, I highly recommend listening to Collinge’s interview and reading his book, particularly if you are a parent with children approaching college-age or if you, as I was, are looking to make a mid-career transition and are considering returning to school full-time in order to do it. What I will discuss in the remainder of this post is the actual impact of student-loan debt within the bankruptcy process.

Student loans are specifically excepted from the discharge of debts resulting from a successful bankruptcy petition by section 523(a)(8) of the US Bankruptcy Code.  This section contains several important components to those considering bankruptcy.  It covers:

  • Any educational benefit overpayment or loan that is …
  • Made, insured, or guaranteed by the government or a governmental unit …
  • Or also any obligation to repay funds received as an educational benefit, scholarship, or stipend …
  • Or any other educational loan defined as a “qualified education loan” by section 221(d)(1) of the Internal Revenue Code of 1986.

Thus, any debt which falls into part or all of this provision is unable to be discharged by bankruptcy—unless, as section 523(a)(8) states at its outset, the debt causes an “undue hardship” on the debtor or the debtor’s dependents. Additionally, section 221(d)(1) of the Internal Revenue Code also defines a “qualified education loan” as any debt incurred solely to pay for higher education expenses. The two primary arguments that a student loan should be discharged in any given circumstance, therefore, are that (1) the debt causes an undue hardship and (2) the debt is not the result of a “qualified education loan.” There are other associated and included conditions as well, but these are the general arguments available.

Both, however, offer extremely high bars to discharge.

As to the undue hardship argument, the courts have rendered multiple decisions on the subject that make it very difficult to establish that an “undue hardship” has indeed been imposed by the debt. The basic test (known as the Brunner Test) for undue hardship is:

  • If the debtor is unable to maintain a “minimal” standard of living for the debtor and his or her dependents based on current income and expenses;
  • If the debtor’s general circumstances indicate that this state of affairs isn’t likely to change throughout the life of the loans;
  • And if the debtor has made good faith efforts to repay the loans.

It doesn’t sound that difficult, but, time and again, courts have ruled against debtors seeking discharge on this basis. Very low-income debtors have the best chance of success.

The argument that the loan is not a “qualified education loan” is a possibility when a loan has been used for living expenses in addition to “higher education expenses,” but the possibility that an argument based on this statutory wording will result in a complete discharge is uncertain at best.

There are, however, many additional arguments to be made on a case-by-case basis, and a knowledgeable bankruptcy attorney should be able to determine whether your student loans are, as most unfortunately indeed are, truly non-dischargeable. Under some circumstances, particularly when a debtor is attempting to provide for dependents on a very low annual income, discharge may remain a possibility, albeit, as Alan Michael Collinge argues, a very slim one.

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.

→ 3 Comments

Posted in Bankruptcy, Chapter 13, Chapter 7, Judicial Decisions, Student Loans

Tagged , , , , , , , , ,

Am I Responsible for My Fiancee’s Debt After Marriage?

Posted on February 23, 2009 | 2 Comments

It may seem cold to suggest that couples considering marriage examine what their mutual debt-load will be after they marry as part of the process, but it is a fact that the debt belonging to one partner will affect the other throughout and, if it comes to it, after marriage. While I am not a family law attorney and do not handle divorce cases, I do encounter the issues created by pre-marital debt quite often in my work as a bankruptcy attorney. Both married couples and couples considering both marriage and divorce have many questions about the debt accrued by each partner individually, before and during the marriage, and by the couple as a unit during the marriage. For those in the not-yet-married category, by far the most common question I am asked is whether a partner, through marriage, will become legally liable for his or her partner’s pre-marital debt after marriage.

Michigan, unlike common property states like California, is an  equitable distribution state, which, in terms of assets belonging to marital partners, means, for divorce purposes, that a judge will decide what assets belong to each divorcing partner equitably. Typically, under this system, property belonging to a marital property prior to the marriage is held to belong wholly to that partner after the marriage, even if the partners cohabitated before marrying. There are many caveats and special circumstances altering this rule, but, in Michigan, this is the case generally.

Likewise, with regard to pre-marital debt, debts incurred wholly by one partner prior to the marriage will belong to that partner after divorce. Debts which are incurred during the course of the marriage, however, are joint debts, generally, regardless of whose name is attached to it. In Michigan, these debts will, like joint-assets, be divided equitably by the court according on the basis of such considerations as the length of marriage, child support requirements, and the level of financial contribution to the marriage by each partner, among many others.

Generally, then, a partner considering marriage needn’t worry about shouldering his or her fiancee’s pre-marital debt (unless they contribute to it or work to detract from it during the course of the marriage). However, that does not mean that there are no further implications of that debt upon the health of the marriage. Struggling with an overabundance of debt is the reason that many marriages fail. If one partner, prior to marriage, is overwhelmed by debt, it is possible that filing for bankruptcy prior to marrying will allow not only that partner to move forward and reconstruct his or her financial health but will also allow the marriage to get started out on solid footing.

A new marriage is by definition a shaky, uncertain thing. If you are a southeast Michigan resident considering marrying but are concerned about the effect your debt-load may have on your future spouse or your marriage in general, please contact me at (866) 674-2317 or john@hillalaw.com to schedule a free, initial consultation.

→ 2 Comments

Posted in Bankruptcy Basics, Bankruptcy Planning, Marriage and Bankruptcy, Michigan

Tagged , , , , , , , , , , ,

What Happens to my Unemployment Benefits if I File Bankruptcy?

Posted on February 20, 2009 | Leave a comment

Unemployment benefits are many people’s only source of income in truly difficult times. However, they are often insufficient for providing the standard of living recipients had before becoming unemployed, and they are, therefore, also often insufficient for keeping people from losing further financial ground and arriving at the possibility of needing to file for bankruptcy simply to keep food on the table.

Fortunately, in Michigan, unemployment benefits are protected when recipients file for bankruptcy. Michigan law provides that unemployment benefits are not included in the “bankruptcy estate” that is created when you file a bankruptcy petition and that the bankruptcy trustee, who oversees that estate, may not, therefore, transfer that money to any of your creditors. Unemployment benefits must, however, be listed as part of your current income in Schedule I, which is one of the several “schedules” attached to each bankruptcy petition. This same amount is then also listed as “exempted” on another of the attached schedules, but it is important to disclose your unemployment benefits as income to your bankruptcy attorney.

Prior to filing for bankruptcy, creditors may endanger your unemployment benefits indirectly by threatening to sue you for money owed to them, and a successful suit would allow them to place a judgment lien on your personal property or even garnish your bank accounts—which might contain unemployment benefit funds.

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, Chapter 13, Chapter 7, Michigan, Unemployment

Tagged , , , , , , , , , , ,

Am I Eligible for a Chapter 13 Bankruptcy?

Posted on January 23, 2009 | 3 Comments

I receive many calls from potential clients who say, straight off, that they want to file a Chapter 13 bankruptcy. Often, as it turns out, these folks are either not actually eligible for Chapter 13 under the specific requirements of the Bankruptcy Code or it is simply not in their best interest. As the question of whether it is the best tool in bankruptcy for a consumer to make a realistic fresh start, that is a very situation-specific discussion, so I will discuss only the question of basic eligibility here.

The threshold criteria for Chapter 13 eligibility are fairly simple.

First, you have to meet the definition of an eligible debtor as described in Section 109(e) of the US Bankruptcy Code. To be an “eligible debtor,” you must:

  • Be an individual (i.e., not a business) or an individual and spouse
  • With regular income
  • Owing less than $336,900 (as of this writing) in debt that is non-contingent, liquidated, and unsecured
  • Owing less $1,010,650 (as of this writing) in debt that is non-contingent, liquidated, and secured 

“Non-contingent” debt is debt that is not dependent upon some future event happening in order to exist. This future even may never happen, so the debt cannot be realistically calculated at the present time. “Liquidated” debt is debt that is of an agreed-upon and fixed amount. A legal claim that has not been fully adjudicated and awarded is not liquidated, for example. “Unsecured” debt is debt such as credit-card debt that is not guaranteed by the debtor with collateral or other property, while “secured” debt is debt, such as a car-loan or home mortgage, that is guaranteed by collateral or property (usually the item in question itself).

The threshold for qualifying as having “regular income” is fairly low. In the Section 101(30) of the Bankruptcy Code, a peson with “regular income” is described as having “… income sufficiently stable and regular to enable [that person] to make payments under a plan under Chapter 13.” In other words, you have to be able to guarantee that you can fulfill the terms of the payment plan that is submitted with your Chapter 13 bankruptcy petition. The Code’s definition is intended to include Social Security, welfare, pension, and alimony recipients, among other non-wage-earning debtors. Simply, you must prove that you have an income of some sort and that it is regular enough to support a 3- or 5-year plan.

As to the debt limitations, there are a few more complications here. First, you must determine whether each individual debt you have is “secured” or “unsecured.” In most cases, this is simple enough, but it becomes complicated in such cases as when a secured debt is under-secured to the extent that it may actually be classified as unsecured or when a debt held by the debtor wishing to file bankruptcy is actually secured through property held or owned by someone else. Each debt must also, as indicated above, be individually determined to be either liquidated or un-liquidated and contingent or non-contingent. Each of these determinations carries its own questions that are best explored with the help of an attorney.

These are the basic points of eligibility for a Chapter 13 bankruptcy.  However, any previous bankruptcies you may have filed may also impact your eligibility. If you have never filed bankruptcy before, there is no problem, naturally. But, if you have filed for and received a Chapter 7 bankruptcy discharge within 4 years before you would file the new Chapter 13 petition, you are not eligible. Likewise, if you have filed for and received a Chapter 13 discharge within 2 years of the date you would file the new Chapter 13 petition, you are not eligible.

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.

→ 3 Comments

Posted in Bankruptcy, Bankruptcy Basics, Bankruptcy Planning, Chapter 13, Home Mortgages and Bankruptcy, Joint-Filing

Tagged , , , , , , , , , , ,

Can I Reaffirm My Car in a Chapter 7 Bankruptcy?

Posted on January 19, 2009 | 4 Comments

This question seems to have been on a lot of people’s minds recently. Nearly every potential client who has contacted me in the past week has had a question about whether or not they could retain secured property such as a home or car if they filed a Chapter 7 rather than a Chapter 13 bankruptcy and, if so, how they could do it. As I’ve discussed previously on this blog, it’s a particularly pertinent question here in the metro Detroit area of southeast Michigan because of the area’s lack of viable public transportation. Fortunately, there are a few different ways to retain possession of one’s vehicle through the Chapter 7 process, although not all of them may be for the ultimate good of the debtor.

First, in a Chapter 7 bankruptcy, it is possible to keep a car without striking a reaffirmation agreement with the loan lender. This is possible if you own the car outright and are not currently making payments to an auto loan lender on the vehicle. If that is the case, it may wholly or partially fit into either the state or Federal exemptions available.  Under the Michigan state exemptions, currently, $2775.00 may be exempted for an automobile. (Note that ”exempted” means that this property or that dollar-value’s worth of property may be “exempted” from the bankruptcy estate that is created legally when a bankruptcy petition is filed and which contains all of your property except that property that is “exempted.”) So, if you own your car outright and its fair-market value is $2775.00 or less (as of this writing), it is simply property wholly owned by you that you may exempt. Under the Federal exemptions, which are used alternatively to state exemptions, the vehicle exemption limit is currently only $2440.00.

Second, a car may be “redeemed” in a Chapter 7 bankruptcy. In redeeming property during a Chapter 7 filing, the debtor makes a lump-sum payment to the creditor for the total fair-market value of the property. This allows the debtor to retain the vehicle free and clear of the obligation to make any future payments, during or after the bankruptcy process. However, many prospective Chapter 7 debtors do not have a sufficient lump-sum available at the time that the bankruptcy petition is filed, and, thus, redemption is not always a viable option.

Third, if you do not own your car outright and are currently making payments on it, it may indeed be reaffirmed in a Chapter 7 filing—but with some caveats.

A “reaffirmation agreement,” first, is an agreement that is struck between the debtor filing for bankruptcy and the automobile loan-provider (or home-loan mortgagee) stating that you are reaffirming the debt you owe to that loan-provider and that you intend to continue paying it either as-is or with modified terms. The reaffirmation agreement keeps the property in question and the terms of payment surrounding it out of the bankruptcy estate.  The agreement, essentially, stipulates that the debtor agrees to continue to be held liable for the full amount of the agreement, even after the bankruptcy discharge occurs, while the creditor agrees to refrain from repossessing the vehicle.

The reaffirmation agreement must be signed before the discharge takes place, and it must be filed with the bankruptcy court. If the debtor is represented by an attorney in his or her bankruptcy filing, the attorney must also sign the agreement, stating that he or she believes that the agreement will not pose an undue hardship to the debtor, and the attorney must further attest that the agreement was signed by the debtor voluntarily and free of any undue influence. If the debtor is not represented by an attorney, the bankruptcy judge must approve the agreement. Additionally, the debtor must file with the court a statement of income showing that remaining disposable income, after the bankruptcy, is sufficient to make the payments required by the reaffirmation agreement.

As to the caveats, there are many. Many attorneys will not sign a reaffirmation agreement for their clients—ever. The primary reason for this is that, when you sign a reaffirmation agreement, you deprive yourself of the opportunity to fully enjoy the protections provided by bankruptcy. It is possible that, at the time you sign a reaffirmation agreement, you feel that you are fully able to handle the continued payments after the bankruptcy discharge. However, hard times may roll around a second time, and you may find yourself unable to continue making those payments at some point after the discharge (and well before the 8 year time-span required between Chapter 7 bankruptcies lapses). At that point, the creditor may not simply repossess the vehicle but will also be able to pursue you to collect the entire amount of the loan—all of which would have been discharged in the bankruptcy without the reaffirmation agreement.

There are ways around this sticky system, however, that an experienced bankruptcy attorney can guide you through to the best possible result.

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.

→ 4 Comments

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

Tagged , , , , , , , , , , ,

New Year, New Solutions?

Posted on January 1, 2009 | Leave a comment

The passing of a year is always an optimistic time for most of us. It’s a little arbitrary, probably, to stand on the threshold of a new year and expect that much will change when, usually, January 1st is never all that much different from the day before it, but we all have that expectation regardless. We formulate New Year resolutions or decide steadfastly that we don’t require them, and we step forward into another year with the notion of change set firmly in mind. “This year,” we tell ourselves, “it’s all going to come together for me.”

That’s as true for me as it is for anyone else. I have great hopes and expectations for 2009 that may or may not be borne out as events unfold. Like everyone else, I have no guarantees that anything will work out particularly well for me, but, like absolutely everyone else, I move forward with my fingers crossed, doing what needs to be done. It’s simply human nature to retain at least enough optimism to keep going forward regardless of whatever it is that may be weighing us down. The New Year holiday represents that optimistic side of our nature as human beings, and it is that side of our nature that does bring us our greatest successes, even when the odds are against us.

It does happen that the odds are against many of us at this particular time in our history. Particularly here in Detroit and the greater southeast Michigan area, many are having a tough time right now. Regardless, just as our political leaders must adapt to new circumstances and develop new strategies for our state and our nation’s economic well-being, we must, individually, do the same. Nobody needs to be told to tighten their belt when the going gets rough, but the details of how to do it are sometimes easier said than done. And, when it comes to dealing with overwhelming amounts of debt in the face of job-loss, medical issues, or other serious matters, there’s nothing easy about it.

In particular, if your belt has been tightened and tightened again and you are considering filing for bankruptcy in the coming year, there are a few basic precautions you can take to improve the odds for yourself—and for your coming year.

Stop Using Credit-Cards

This is one of those “easier said than done” things, especially if your situation has become so strained that you are, to some extent, living off of your credit-card right now. But credit-card debt is expensive in the long-term. It isn’t always to focus on the long-term when the short-term has become difficult, but interest-rate changes, the inflated rates on cash-advances on a credit card, and the ability of the card issuers to alter the terms of your agreement with them at virtually any time throughout the length of your relationship means that, unless you’re careful, you could make a short-term difficulty into a very long-term one.

Further, if you are considering bankruptcy anytime in the coming year, you don’t want to give your creditors any justifiable reason to claim that your bankruptcy petition is fraudulent and should be dismissed. Use of a credit-card when you know you will be filing for bankruptcy is fraud.

Stay Current on Your Car and Mortgage Payments

Again, if you’re in trouble, this may be a very difficult thing to accomplish. It may, in fact, be the primary reason you consider filing for bankruptcy. In general, especially here in Metro Detroit, where the public transportation options are slim to none, it is important to have a reliable vehicle before, during, and after a financial crisis. Losing a car or, especially, a home will obviously worsen the odds that you will emerge from the crisis. But, if you are planning to file bankruptcy and hope to save a home or vehicle, it is also important to continue demonstrating your ability to make payments on the property so that your Chapter 13 plan will appear effective to the Bankruptcy Trustee who will oversee your case.

Close Unnecessary Bank-Accounts

If you have accounts that you don’t use or rarely use, transfer the funds to other accounts and close them out. It just makes things easier.

Keep Good Records

Complete and accurate records of your financial history will enable a bankruptcy attorney to do the best job for you that he or she can.

These are just a few of several steps you can take to make not only the short-term possibility of a Happy New Year alive but also the long-term possibility. If it is not possible for you to take at least the first two steps I’ve discussed above, it is possible that a bankruptcy may be the best financial course of action for you in the New Year. Even that, however, is still cause for optimism. A bankruptcy is, after all, not an ending but a new beginning, like the New Year holiday itself, and, if your situation requires that drastic step, it should be viewed as an optimistic move forward.

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, Chapter 13, Chapter 7, Michigan

Tagged , , , , , , , , ,

What Happens to Gifts that I Make under Bankruptcy?

Posted on December 26, 2008 | 1 Comment

gift‘Tis the Season, or so I hear, in which many of us are not only receiving gifts of one sort or another from others but in which we are likely to make gifts to others. Some of us make gifts or tithe all year long or are even required (or encouraged) to do so by stricture of our faith. With regards to bankruptcy, there is both good and bad news when it comes to gift-giving.

As far as the Bankruptcy Code is concerned, there is gift-giving and then there is gift-giving. That is, there is gifting between individuals on a simply personal level—between spouses, family-members, friends—and, then, there is gifting for religious, charitable purposes. The first sort of gifting is problematic. This is the “bad news” of giving. Conveyances or transfers between a debtor considering bankruptcy and another individual he or she is personally acquainted with can appear fraudulent to the bankruptcy trustee, judge, or creditors who, after a bankruptcy petition is filed, may not be receiving the full amount that they believe they are owed.

Specifically, if a transfer or conveyance of property is made within two years of the filing of a Chapter 7 bankruptcy petition by an insolvent debtor, a creditor or trustee may object to a discharge. The trustee may also attempt to recover the transferred property, which means that he or she may take the property from the party is has been transferred to. For any of these things to occur, the objecting creditor or trustee must prove that the transfer was made with the intent to “hinder, delay or defraud creditors.” An honest gift within two years of the filing of a petition, when events which can force a person into considering bankruptcy can and do happen so much faster than that, may not have been accompanied by any intent to defraud and may not, logically, look like it was, but, nevertheless, if the possibility exists that an objection may be raised which could endanger the entire petition, it may be best to wait until the year has passed to file the petition. This is the sort of “pre-petition planning,” however, that it is best to discuss with an experienced bankruptcy attorney.

Additionally, especially in a Chapter 13 bankruptcy, some creditors are “priority” creditors who are entitled to be paid first and foremost. These “priority” creditors include those owed child support or other domestic obligations, the trustee who requires a 10% or so fee from a Chapter 13 plan, and others. Transfers and conveyances can raise questions with regard to the “preferences” owed certain creditors, which, in addition to “priority” creditors, also includes the preferential status of secured creditors such as a home loan mortgagor over unsecured creditors such as credit-card issuers. A transfer of property worth more than $600 within 90 days of the filing of a petition from a debtor that allows a creditor (which could include a family-member or friend owed money to) to receive more than they would have received in a Chapter 7 liquidation may be set aside by the trustee. Again, these sorts of considerations prior to filing a bankruptcy petition are best discussed with an attorney.

On the “good news” side of gift-giving, there is an exception in place for certain charitable contributions. The Religious Liberty and Charitable Donation Protection Act of 1998 amended the Bankruptcy Code to protect contributions made to protected organizations. They must not have exceeded 15% of the debtor’s gross income  the year they were made, and, if they were, must have been consistent with the debtor’s history of such giving. The 15% limit applies to each individual transfer, also, not the entire year’s worth of charitable contribution, even if it exceeds 15% in total (courts have ruled that no part is protected, however, if a total15% is exceeded without any past giving history). The specifics of the unavoidable nature of such gifts and whether a receiving organization is a protected organization are complicated and should be discussed with a bankruptcy attorney.

Additionally, there are similar considerations to post-petition transfers and conveyances.

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 & My Credit-Score, Bankruptcy Basics, Chapter 13, Chapter 7

Tagged , , , , , , , , , , , ,