Tag Archives: john

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 considering filing for bankruptcy and have questions about purchases you’ve made with or without a credit-card, please contact me at jhilla@aronofflinnell.com or (248) 977-4182 to schedule a free, initial consultation.

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Posted in Bankruptcy, Bankruptcy Basics, Bankruptcy Planning, Chapter 13, Chapter 7

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

Posted on March 3, 2009 | 4 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 would like to discuss your ability to file bankruptcy and explore all of the options available to you, please contact me at jhilla@aronofflinnell.com or (248) 977-4182 to schedule a free, initial consultation.

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

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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 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 jhilla@aronofflinnell.com or (248) 977-4182 to schedule a free, initial consultation. Together, we can examine whether filing for bankruptcy prior to marrying will be beneficial to you both.

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

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Can I Reaffirm My Car in a Chapter 7 Bankruptcy?

Posted on January 19, 2009 | 3 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 considering filing for bankruptcy and would like to discuss the possibility of retaining your vehicle or other secured property, please contact me at jhilla@aronofflinnell.com or (248) 977-4182 to schedule a free, initial consultation.

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

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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 have any questions about transfers or conveyances of cash or property you have made while considering filing for bankruptcy, please contact me at jhilla@aronofflinnell.com or (248) 977-4182 to schedule a free, initial consultation.

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

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Can I Discharge Traffic Tickets in Bankruptcy?

Posted on December 23, 2008 | Leave a comment

This is probably one of the common questions I receive from potential bankruptcy clients. And the short-answer is no, you cannot discharge traffic tickets in bankruptcy. This is what you will generally find in the “FAQ” section of many bankruptcy attorneys’ websites. However, there is a little more to it than that.

That short-answer really applies to Chapter 7 bankruptcy in particular. Under Chapter 7, traffic tickets are non-dischargeable under Section 523(a)(7) of the Bankruptcy Code, which specifically states that fines and penalties owed to and for the benefit of governmental units are non-dischargeable. This includes traffic tickets and other criminal (or punitive) fines.

Under  Chapter 13, however, some of these debts may be effectively dischargeable. Some restitution debts imposed by courts—those included in a sentence for the conviction of a crime—are non-dischargeable, but other restitution debts may be discharged. Fines imposed directly (not as a condition of probation or imposed in pre-trial hearings, etc.) as a criminal penalty are non-dischargeable. The question here is whether the fine is imposed as part of a sentence for the conviction of a crime. The definition of and associated penalties for traffic (and most other non-Federal) crimes is a matter of state law. Thus, it is largely a question of state law where the offense occurs whether a traffic fine can be discharged in a Chapter 13 bankruptcy. Some states define “crimes” as only misdemeanors and felonies and not civil infractions, moving-violations, and other categories of offense for which run-of-the-mill traffic tickets may be issued.

In Michigan, where I practice, this is the case. Traffic offenses in Michigan are divided into 2 categories: crimes and civil infractions. Crimes are misdemeanors and felonies only. Criminal traffic offenses are, as one would expect, serious violations such as reckless driving, leaving the scene of an accident, driving with a suspended license, fleeing and eluding police, operating while intoxicated, and “felonious driving.” (Reckless and felonious driving are often charged as lesser-included offenses of other misdemeanor or felony charges.) Additionally, even if charged with a civil infraction only, failing to answer a summons or to follow the directives of the ticket received can incur a more serious criminal penalty.

When such fines are dischargeable under Chapter 13, they may be allocated a category of debt in the Chapter 13 payment plan along with other unsecured debt, which is generally paid secondarily to secured debt and other priority debts, although this is not always a certainty. Some governmental debt may be entitled to priority payment status. However, even non-dischargeable criminal fines or governmental penalties may still be provided for in a Chapter 13 plan, although they will not be able to be discharged through the plan. Otherwise, general unsecured debt which may include dischargeable traffic fines, is afforded a lower priority payment status than other types of debt, and the priority debt and secured debt must be paid first, allowing the unsecured, non-priority debt to be discharged.

If you have any questions about traffic penalties in bankruptcy, please contact me at jhilla@aronofflinnell.com or (248) 977-4182 to schedule a free, initial consultation.

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Posted in Bankruptcy Basics, Chapter 13, Chapter 7, Michigan, Traffic Tickets and Criminal Fines in Bankruptcy

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If I File Bankruptcy, What Happens to Stuff That I’ve Pawned?

Posted on December 18, 2008 | Leave a comment

If you file either a Chapter 7 or Chapter 13 bankruptcy, nearly everything you own becomes part of the “bankruptcy estate,” subject to the oversight of the bankruptcy Trustee. All of your debts, at least initially, are subject to the Automatic Stay that goes into effect against all of your debts immediately upon filing the bankruptcy petition. For much of a debtor’s personal property, these factors do not permit such credit actions as repossession, foreclosure, or other collection attempts.

For pawned personal property, however, the 2005 BAPCA amendments to the Bankruptcy Code, in Section 541(b)(8), specificially excluded from the bankruptcy estate that is created by the filing of a petition:

  • “Tangible” personal property in the possession of the pawnbroker
  • When the debtor has no obligation to repay the money, redeem the collateral, or buy back the property at a stipulated price … 
  • And neither the debtor nor the trustee have exercised any right to redeem provided under the contract or State law, in a “timely” manner (as provided under State law and Section 108(b) of the Code)

What this means is that property you’ve pawned—given to a pawnbroker in exchange for a certain amount of cash with no obligation to return the money and reclaim the property—does not become part of the bankrupty estate unless you or the Trustee has, within the time-constraints of applicable state law and Section 108(b) of the Bankruptcy Code, acted to redeem the property through the bankruptcy process. In that case, the pawnbroker is not required to return the property to the debtor when the bankruptcy petition is filed the way, say, an automobile dealer must return a repossessed vehicle when a bankruptcy petition is filed.

The pawnbroker may not be free and clear to sell the property, on the other hand. The amended Code leaves that unclear. If the selling of the property can be characterized as an act to collect on a debt that existed prior to the filing of the petition, it is subject to the Automatic Stay against such debts that goes into effect when the petition is filed. Further, the pawned property may be required to be turned over to the Trustee if the property is property that the Trustee may “use, sell, or lease” or that the debtor may exempt. Also, there is nothing stopping a debtor for providing for the disposition of the property and its associated debt in a Chapter 13 payment plan.

State law, then, governs several aspects of this situation. In Michigan, the title to the pawned property vests with the pawnbroker after 3 months. The pawnbroker may not sell the property until that 3 months has passed. Therefore, the debtor and Trustee’s right to redeem the property (recovering it for a given lump-sum of cash) is “timely” within 90 or so days of the pawning of the property. Therefore, a debtor considering bankruptcy, especially Chapter 7, who has pawned property that he or she wishes to recover, should keep this time-frame in mind. After the 3 month deadline has passed, under Michigan law, the title of the pawned property vests with the pawnbroker, allowing him or her full right to re-sell or otherwise use the property, and it may not be recovered by the debtor.

If you are considering filing for bankruptcy and have concerns about your pawned or other personal property, please contact me at jhilla@aronofflinnell.com or (248) 977-4182 to schedule a free, initial consultation.

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Posted in Bankruptcy, Bankruptcy Basics, Chapter 13, Chapter 7, Michigan

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Why Does a Chapter 7 Cost So Much?

Posted on December 16, 2008 | 4 Comments

I saw this question posted on an online discussion board, and, possibly because it was rather blunt, it had gone unanswered for several days. Personally, I thought it was a good, basic question that deserved an honest answer. I have known many people in my life who have half-seriously “joked” that they would file for bankruptcy “if only they could afford it.” It is a question that many people have, and it is worth discussing.

Most attorneys in my area of southeastern Michigan are currently charging approximately $1000 to file a basic Chapter 7 bankruptcy petition. Depending on the geographic and the attorney, this might or might not include the Court’s filing fees. And, although I have seen a few attorneys and, especially, non-attorney “bankruptcy petition preparers” charging less than this in my area, this is generally also a starting-point price rather than a ceiling. It can rise with the level of complexity, in other words. Some attorneys—although not myself—charge much more than this as a starting-point.

The filing fees for a Chapter 7 bankruptcy filing are currently $299. Debtors may file pro se (file the petition themselves, without an attorney’s assistance or representation, that is), paying only these filing-fees and avoiding anywhere from $700-$1000 (or more) in attorney fees, but, unless the property of such debtors is very limited, they run the risk of misunderstanding the available exemptions and other complexities of the bankruptcy process and missing out on utilizing the process to its best effect. In any case, even without an attorney’s assistance, a Chapter 7 still costs roughly $300.

Most people who have a certain amount of property that they wish to protect do wish to take advantage of the expertise of a bankruptcy attorney, however, and, at that point, the question remains: why does that expertise cost so much?

The pat answer is the same that any service-provider in any industry, from automotive to medical and onward, would give: “I charge $X per hour, and the work will take X hours.” In the case of an attorney, that is certainly true. Attorneys in Michigan charge in hourly rates anywhere from around $150/hour upward, depending on experience and the legal areas they specialize in. The “flat fees” that attorneys charge for something like a Chapter 7 bankruptcy filing do approximate an attorney’s hourly rate billed for the approximate number of hours it usually takes to meet with the client several times, collect their information and paperwork, and prepare the exceedingly lengthy bankruptcy petition and attached schedules and other documents. And that paperwork, since the 2005 BAPCPA (“Bankruptcy Abuse Prevention and Consumer Protection Act”), has grown much more complex and, therefore, more time-consuming and with more legal obligations for the attorney and, thus, more expensive for the debtor.

But the real answer, I maintain, is not that attorneys simply deserve an hourly rate that boggles the minds of most working-people. Rather, the answer is that, whatever an attorney is charging for a Chapter 7, it is a small price to pay for the value you receive. For a mere $1000 + filing-fees, you can save a $200,000 home from foreclosure, stop night-and-day collection call harassment, and eliminate many thousands of dollars’ worth of credit-card debt. Making all of this happen properly is hard work for the attorney filing the petition, but the real reason a Chapter 7—or any legal service—costs what it does is that that is what the end-result is worth.

If you have any questions about Chapter 7 or Chapter 13 bankruptcy or any other legal matter, please contact me at jhilla@aronofflinnell.com or (248) 977-4182 to schedule a free, initial consultation.

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Posted in Bankruptcy, Bankruptcy Basics, Chapter 7, Michigan

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Do I Need to List Overseas Property in my Bankruptcy Petition?

Posted on December 8, 2008 | Leave a comment

I’ll start right off with the short-answer to this question: YES. You definitely need to include overseas property in your bankruptcy petition schedules.

My advice to debtors is the same that most consumer bankruptcy attorneys would give their clients: list everything. Always. If you’re not sure if it needs to be listed, list it anyway. Finding a way to list hard-to-classify, value, or locate property is really the primary task of the debtor’s attorney, however. But attorneys can only work with the information that is given with them, and, in my experience, debtors often neglect to inform their attorneys about property that doesn’t seem like it would be within the jurisdiction of the bankruptcy trustee governing the case. It is perfectly logical to assume that a United States bankruptcy trustee would not be able to reach extraterritorial property.

That is, however, an incorrect assumption. Depending on the location and value of the property, it is possible that the trustee will not want to take the trouble to deal with property located outside the United States. But this should not be assumed from the start. Occasionally, a trustee may simply happen to have professional or family connections in a foreign country, making it a simpler (and cheaper) matter for him or her to assess, reach, and, possibly, liquidate the property. You never know!

Given the fluctuation of the US dollar at the moment, it is important to be cognizant of the rising value of foreign currency in relation to our own. Property that might not have been worth the trustee’s while to liquidate may now be a more tempting prospect. That said, debtors considering bankruptcy should not be afraid to list overseas property, particularly if the property is located in a country whose currency has not risen past the US dollar in dramatic fashion, as many have. Such property is still, generally, quite easy to exempt.

The bottom-line: be sure to list all of your property for your bankruptcy attorney so that he or she may deal with it in the most efficient manner possible. The Bankruptcy Code requires  that all property be disclosed, not merely US property, and any failure to disclose property, here or elsewhere, may result in the property’s liquidation, foreclosure, or invalidation of the bankruptcy itself.

If you are in southeast Michigan and are considering filing for bankruptcy but are concerned about the implications of your foreign property, please contact me at jhilla@aronofflinnell.com or (248) 977-4182 to schedule a free, initial consultation.

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

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